And every time a patient opts out, they lose money, $20,000 per patient. So, generative AI on the ServiceNow platform obviously can go in there and radically cut down the cycle-time of these clinical trials. So, CEOs right out of the gates are ready to go. Your team, my team, let’s figure this out. So, there’s a real appetite. And I think why I’m so bullish is we have a platform that already has it.
Kash Rangan: Amazing. Thank you so much.
Bill McDermott: Thank you, Kash.
Operator: Your next question comes from the line of Keith Weiss with Morgan Stanley. Keith, the floor is yours.
Keith Weiss: Excellent. Thank you guys and again, congratulations on really strong end to 2023. I wanted to talk a little bit on the expense side of the equation. You guys really outperformed nicely on the operating margin side of the equation this quarter looking for further expansion next year. And looking at sort of where you guys are hiring, I was a little bit surprised to see more strength on the R&D side of the equation than sales and marketing. Sales and marketing headcount is only up 6%. So, you talk to us about sort of that relationship changing a little bit. R&D headcount is almost matching sales and marketing head count right now. If we went back five years ago, sales and marketing was 50% ahead of R&D. So how are the investment priorities changing now, especially as we go to 2024? And how are you guys feeling about sales capacity and sort of the necessity to expand sales capacity heading into 2024?
Gina Mastantuono: Hi Keith, this is Gina. Thanks so much for the question. So, yes, we’re really proud of the beat on the topline as well as the bottom-line in Q4 and obviously continuing to expand those margins in 2024. Specifically, when you think about investments in R&D head count, it’s all around continued innovation and our investments in Gen AI and AI. And so not surprising given the commentary that you’ve already heard, we’re continuing to double down in investments on fingers on keyboards, engineers really driving the Gen AI revolution. So, you’ll continue to see more of that. On the sales side, it’s really about scale and leverage, right? And so sales and marketing head count, there’s a lot in there. It’s not just quota-bearing feet on the street sales, right?
So, you’ve got marketing, you’ve got marketing operations, you have sales operations in there. If you actually were able to break it down to feet-on-the-street quota-bearing sales, you would see that growth rate much higher. And in fact, as I think about sales capacity going into 2024, we have a larger increase in ramped reps going into 2024 than we’ve had in years. So, from a capacity perspective, we feel great about how we’re entering 2024.
Keith Weiss: Excellent.
Gina Mastantuono: Awesome. Thanks for the question Keith.
Keith Weiss: It seems like it really speaks to an increasing sales efficiency then. You just need less people to support any given quota-bearing sales reps.
Gina Mastantuono: Absolutely. Productivity and efficiency is going up as well as the fact that from a scale perspective, you’re not growing some of the operational heads as much.
Keith Weiss: Got it. Super helpful. Thank you guys.
Gina Mastantuono: And we’ll be definitely increasing hiring as we go into 2024 as you would expect.
Bill McDermott: And Keith, Gina doesn’t brag about this, neither does Russ Elmer, who is our Office of General Counsel lead. We’re using the Now platform. So, in all the back office functions of the company, we’re so automated, so productive. And they’re getting things done on the Now platform that it would take other companies five and six times the headcount to do the same job. And that is really something. We actually even had with legal service delivery, AI tell us that we’re spending too much time on contracts less than $250,000. Our office of General Counsel, Russ made the decision based on AI that we could fundamentally change that and reorient the workflow around those kinds of agreements, which gave us a huge rush, and he didn’t have to hire anybody.
And then he actually took that product and our great engineering team built it. We call it LSD, Legal Service Delivery and now lawyers all over the world, they want to jump on. So, everything we do internally with Now on Now as an external marketing force associated with it.
CJ Desai: Yes. And Keith, Gina handled this really well in terms of sales efficiency. But one of the things that Bill mentioned that I just wanted to call out that we are really proud of our sales teams besides expansion of our platform in different buying centers, but also the new logo growth. The new logo growth for 2023 was way ahead of what our expectations were specifically in Americas and Europe compared to 2022, including the large transaction that Bill referenced. But when your sales capacity and sales efficiency specifically is improving, while you’re also gaining new logos, which is just a very super proud moment for us in 2023.
Operator: Your next question comes from the line of Samad Samana with Jefferies. Samad, your line is open.
Samad Samana: Hi, thanks. Congrats on a great close to 2023. Gina, I was wondering if maybe you could help us understand that on the cRPO upside, if you think about the 200 basis points and could you kind of break down for us how much of it was adoption of Gen AI and the net new ACV that, that drove exceeding expectations versus just kind of more strength than expected on the renewal cohort and what drove — what’s the mechanic of the upside was in the quarter?
Gina Mastantuono: Yes, sure. So, we beat our Q4 cRPO growth guidance by 200 basis points as you know. And I would say it’s driven probably half and half by net new ACV outperformance and certainly, Gen AI is in there, but it’s not all Gen AI. So, our core business is also doing well. And then we also did see higher early renewals than we had assumed in our guidance. And I would say it’s about half and half of the total beat.
Samad Samana: Great. And then, Bill, this is maybe for you or for CJ. But as you think about the product portfolio and some of the newer products you’ve talked about over the last year or so beyond Gen AI’s observability or ERP workflows, where are you seeing the most demand or interest outside of Gen AI? And what are you most optimistic about in 2024 beyond Gen AI?
CJ Desai: Absolutely. So, Samad, here is what I would say. In general, every single workflow grew for us on net new ACV, which is always a great thing that, that’s a balanced performance across every single workflow. And so really proud of the team, both our go-to-market and engineering teams that we continue to deliver innovations and our go-to-market teams, they know how to sell that innovation across our product lines. So, that’s number one. Number two, when I look at some of our industry products that I called out, specifically for TMT as in telco, media and tech, they are seeing very nice traction. We also released in our technology workflow under the leadership of Pablo Stern, operational technology product that also grew very nicely.
