Scaling Global Organizations in the Age of AI with ServiceNow Chairman and CEO Bill McDermott

Few teens are business owners, but by age 16, Bill McDermott had purchased and was running a local deli. Now he runs leading global technology powerhouse ServiceNow, a company that is defining how the world’s largest organizations transform for the digital age. Sarah Guo sits down with ServiceNow CEO Bill McDermott to discuss his journey from child entrepreneur to CEO, and how he navigates his role as a leader in the age of AI. Bill argues that human connection is still a vital part of being a successful leader, and as such, AI must be used to serve people rather than substitute for ambition. He breaks down the mechanics of hyper-growth, and the art of staying customer-centric at a global scale. They also discuss the future of enterprise software, how generative AI is fundamentally reshaping the labor market, and what founders need to know about building a resilient company culture that survives economic and technological shifts. Sign up for new podcasts every week. Email feedback to [email protected] Follow us on Twitter: @NoPriorsPod | @Saranormous | @EladGil | @BillRMcDermott | @ServiceNow Chapters: 00:00 – Cold Open 00:50 – Bill McDermott Introduction 01:14 – Lesson from Buying a Deli 07:35 – Leadership in the AI Era 09:41 – How Bill Got Hired at Xerox 15:47 – Can Agency Be Taught? 18:40 – Seeing Change as Opportunity 25:18 – ServiceNow as an AI Control Tower 30:30 – Which SaaS Gets Disrupted? 32:22 – Defining a Platform Business 36:25 – Does AI Decrease Implementation Time? 39:06 – Agents Will Reshape the Workforce 40:59 – Success Signals at ServiceNow 44:07 – Enterprise Attitudes About AI 48:41 – How AI Has Changed Customer Conversations 50:48 – Bill’s Curiosity Beyond ServiceNow 52:29 – Day in the Life of a CEO 57:27 – Conclusion

• 0:00Speaker 00

  The cost to replace an enterprise platform in this SaaS apocalypse that people talk about is an extraordinary expense. Let's take that cost and then let's take the cost associated with the human capital doing that instead of something else because the platform was doing the work for you. And then let's add up the cost of the GPU factory and the tokens that will materially affect their business model. And so for a simple application on our platform, it would be 10 times greater in cost to try to replicate it with a language model. People that run businesses understand that people make mistakes. They never will forgive software for making a mistake.

• 0:51Speaker 01

  Hi listeners, welcome back to No Priors. Today I'm here with Bill McDermott, CEO of ServiceNow, and the closest thing we have to a rock star in enterprise technology. We talk about leadership in the age of AI, what enterprise customers actually want, the difference between SaaS platforms and the SaaS apocalypse theory, and the next 10 years of ServiceNow. Welcome. Thank you so much for being here.

• 1:12Speaker 00

  Thank you for having me, Sarah. Thank you.

• 1:14Speaker 01

  So I want to talk about your career and leadership and what's going on with ServiceNow, but I want to start at the beginning. I read Winterstream last week, and it's an amazing book. You talk about the deli you bought when you were 16. First of all, that's a very strange thing to do, but it's such an amazing story. Can you tell me a little bit first about your thought process and then we can talk about how you manage it?

• 1:39Speaker 00

  Yeah, I don't deserve too much credit for, you know, doing a strange thing, buying the deli because I was really trading in multiple part-time jobs. At the time, I was stocking shelves, pumping gas, and bussing tables. And so I had a chance to consolidate all of that into the delicatessen and have one job where I could spend all of my hours. And for a kid going to high school, that kind of made a little bit more sense. So I got lucky. I bought the business for 5,500 notes, 7,000 with interest. If I make the payments, I keep it. If I miss a payment, they take everything away from me. So it was a pretty cut and dry moment.

• 2:25Speaker 00

  And I think the biggest thing that I've learned in my life, and especially there, is it's all about the customer. In the end, the customer and the customer alone determines whether you win or lose. And it's a very simple equation. If you keep them coming back, you got a good chance. And if you don't, you lose. And, you know, back then, one of the most interesting parts about that store was knowing your customer and knowing your base. And I really had, you know, three main customers. You know, one was the blue collar worker, like my dad, as I said in the book, was rich on Friday and dead broke

• 3:07Speaker 00

  by Sunday morning. There were the senior citizens, and this was the early days of DoorDash, I guess, because they never wanted to leave their house, and we delivered, and no one else did. And the hard part was getting the kids to walk a block and a half past 7-Eleven to come to my store. And these were the early days of video games, and Asteroids and Pac-Man. And, you know, you tell that to people today, most of them never even heard of these games. But kids would stand there for hours, plucking their parents' quarters into those games. And that's how I got them to walk a block and a half past 7-Eleven and come to my store. At the end of a long day, one of the young people said to me,

• 3:52Speaker 00

  you know, when we want to have good food, be treated with dignity and respect, and play video games, we come to your store. And when we want to steal stuff, we go to 7-Eleven. So if you take care of your customer, you know who your customer is, and you give them what they want, just the way they want it, no matter what business you're in, you've got a really good chance. And that's all I did. And it put me through school, including college, and it got me my start. And I have to tell you, the EQ that comes with dealing with 500 customers a day is worth a lot. And I have a feeling the world could use a little more EQ right now.

• 4:38Speaker 01

  I learned a great deal, not managing a deli, but at least being a hostess and an outback steakhouse.

• 4:44Speaker 00

  See?

• 4:45Speaker 01

  Yeah.

• 4:45Speaker 00

  You can relate, right?

• 4:47Speaker 01

  Well, you just, you know, the repeats of dealing with a lot of different types of people.

• 4:50Speaker 00

  Yeah.

• 4:50Speaker 01

  Useful. So it's still like amazing and strange to me. You talk about this set of customers that you, you know, understood and tried to serve. Like, were you just sitting there in the deli observing them before you bought the thing? Like, how did you even figure out these are the people?

• 5:06Speaker 00

  I worked there first, you know, and what happened was the owner was going through some personal divorce circumstances and wanted out. And I was the guy that was always there anyway. So he tried to sell it. It was only a one-year lease. You never owned the land or the building, so he was selling a one-year lease. The lease was owned by Sunmark Industries, which is Sunoco Gas Station. And they could throw you out anytime they wanted. So only a kid who didn't know any better would pay anything for it. So eventually, that's how the deal got put together. I said, I don't have any money, but I'll, you know, take a note from you and pay you back with interest. If I miss a payment, you get everything back.

• 5:52Speaker 00

  What was really interesting about the story is I didn't have any money. But what I did have, because I worked there, is relationships with all the suppliers. So I got them to give me the first order on consignment. I said, I will always pay you back. This is not a favor. This is a chance for you to get your shelves filled up with your stuff that I'm going to sell for you. But in the end, I'll always owe you that first delivery. And probably they charged me too much on the margin, but I didn't care. I was in business and that's all I wanted was a shot. And that's all I've ever wanted is a shot. And I'm so honored that in my life I've had the shot.

• 6:37Speaker 00

  And when you have a chance, you can really bring the winner within you out. And all people should ever want is an opportunity, because an opportunity is a gift. And it's something that you should really cherish. And every time you get one, make the most of it.

• 6:53Speaker 01

  That resonates. I, one of the things I love about being in venture is you're in the business of giving people shots.

• 6:59Speaker 00

  Exactly.

• 7:00Speaker 01

  And entrepreneurs like yourself, they-

• 7:03Speaker 01

  Especially when they get to be very successful, they value it for a really long time.

• 7:06Speaker 00

  Well, I deeply admire what you do. And I mean, can you imagine being the guy that came from the corner store that went to the corner office? And I think about your great job that you do in the venture world and how unbelievably creative you have to be and the benefit of seeing all these young entrepreneurial companies. It's something I've always had a great deal of interest in. So like, I should really be doing the interview of you right now, Sarah.

• 7:33Speaker 01

  Absolutely not. When you, okay, so it starts with, you know, your, your part-time jobs in the deli and then this amazing career in sales and leadership and SAP and Service Now. One more piece on the leadership front before we go to, you know, talking about the companies that's happening in the tech landscape. So in the book, you talk about resilience and ambition and disciplined execution. When did those ideas crystallize in your head as the way you would lead? And then, do you, do you think that changes today, given how dynamic the landscape is? And I was just talking to the leader of a, you know, tens of billions of dollar AI company. And they're like, we have to update our strategy every

• 8:15Speaker 01

  month. Like, we have no idea what's going on. And so, how do you, how do you think about operating in today's environment?

• 8:21Speaker 00

  I had the great pleasure last night of meeting with about 800 business people that were in town from Brazil. And we were talking about leadership. And they took me back to my book, Winner's Dream. A lot of them listened to it, which is fun, because I, I actually read it, kind of straight through in between business trips. And I'm glad I did, because it added the authenticity to the book I had hoped for. But it was wonderful being with them. And they really wanted to talk about leadership. And I think leadership is the, the greatest profession in the world.

• 9:03Speaker 00

  And in this environment we're in today, which is changing and it's dynamic like never before, and it's fast like never before. I tell them, it is fast, but it'll never move this slow again. So this is the way it's gonna be.

• 9:19Speaker 01

  It's kind of stressful.

• 9:20Speaker 00

  Yeah, it is, and it is in one way, but it's inspiring in another. You know, we have to learn to get like real inspiration from the challenges that are in front of us, because if we're able to cope with them, and especially if we're able to overcome them, we get superpower. But I go back to the original job of being a leader and, you know, getting my first break with getting my job at Xerox. And, you know, Xerox back then was the Google of its era.

• 9:53Speaker 01

  Right.

• 9:53Speaker 00

  And it was just like such an honor. And, you know, I go back to that original interview a lot in my mind, and I think about the opportunity of getting that shot. And, you know, I'm getting geared up to leave Long Island. My dad drops me off at the railroad tracks and, you know, I'm just turned 21 years old. And I guaranteed my dad I was coming home with my employee badge in my pocket. And there's something important about that because my dad said, Billy, you're a good guy. Don't put all that pressure on yourself. And I said, no, no, no, I guarantee it. And I went in to New York that day and I was

• 10:34Speaker 00

  reading the annual report on how that CEO, David Kearns was his name, was reinventing this corporation under the quality management principles given to the world by Deming. And at that time, as you know, most of the most valuable companies in the world were from Japan. And they were actually selling a very high quality product.

• 10:58Speaker 00

  For a lesser price than Xerox was building a lesser quality product. It's hard. Hard to do, right? And so this is exactly the time I'm joining the company, but I was so inspired by this guy who wanted to transform that company that by the time I got into New York, I wanted to be the next David Kearns, but I had to go knock on cold doors for a living to get my shot. So on my last interview, I'm so psyched though, because I'm meeting with the big boss at Nine West 57th overlooking Central Park. And I sit on a bench next to another friend that's my buddy today, who's waiting for an interview. And he's been waiting for a long time. I said, what are you doing waiting?

• 11:42Speaker 00

  I go over to Joanne Siciliano, who's a receptionist, and I said, look, I had all day. I'm not going anywhere. Please let Mr. Fullwood know I'm waiting and I really look forward to our meeting. I was instantly invited into his office. And this is the essence of it all. As I looked over his shoulder at Central Park on the 38th floor of Nine West 57, I realized then, as I realize now, it was not an interview. It was a battle for survival. Because if I get that job, I'm in control of my own destiny. It's my shot and it's up to me to do something with it.

• 12:24Speaker 00

  So at the end of an interview, he said to me, Bill, it's very interesting interview. You're an interesting young guy. The HR department's going to get in touch with you in the next couple of weeks. And I said to him, you know, Mr. Fullwood, I don't think you completely understand the situation, sir. And he looks at me with the tilted head, like, what's this kid up to? And I said, um, I haven't broken a promise to my father in 21 years and I guaranteed him I'm coming home tonight with my employee badge in my pocket. And he really like kind of tilts his head now like, what's this guy up to? And, uh, you know, he goes, you know, Bill McDermott, as long as you haven't committed any crimes, you're hired. Now, I hadn't committed any crimes. Of course, I told him that.

• 13:09Speaker 00

  And I double checked that you really mean it, I'm hired. And he goes, yeah. So I go over there and I, you know, he's kind of sitting the way you are. I pick him up, hug him a little bit, put him safely back in his chair. And I run past the receptionist, Joanne, and get down to, um, Fifth Avenue and head over to Sixth Avenue to a bun and burger to a payphone. I call up mom and dad and I say, you know, break out the Corbel, got the job. Now, people don't often know, especially in Silicon Valley, what Corbel is.

• 13:41Speaker 01

  I'll admit, I do not.

• 13:43Speaker 00

  It is like the cheapest, worst champagne you've ever, ever had in your life.

• 13:48Speaker 01

  Okay.

• 13:48Speaker 00

  But in Long Island, where I come from, that's Cristal. So the point of the whole thing, 25 years later, Emerson Fullwood asked me to give a speech at the Rochester Institute of Technology to students. And in introducing me, he said, the only time that he had ever broken policy at the Xerox Corporation was the day he hired me. I didn't know that. And what I found remarkable about it is that he remembered that and he knew what he was doing when he did it and thought it was worth it.

• 14:32Speaker 00

  So we have to put tremendous care into people, tremendous attention to detail when it comes to, you know, uniqueness in human beings and what they are capable of doing. And without him, I wouldn't have gotten my shot. And I never forgot that. And today, when I have CEO meetings, he still comes to them and he's my friend for life. So I think somehow in the mixture of things with AI and today's society, we're losing a little bit of the human power that we all have to connect with each other and do magical

• 15:16Speaker 00

  things together and just make sure we remember.

• 15:20Speaker 00

  AI is to serve people. And to make the human ambition greater, not to take it away from us. And so that's my feeling on, you know, just how things have changed. But in many ways, the essence of leadership, human connection, people are just more important now than ever.

• 15:47Speaker 01

  I know I said I was gonna then ask you about ServiceNow, but I have to ask you a little bit more about this.

• 15:52Speaker 00

  Sure, let's do it.

• 15:52Speaker 01

  Do you think it's possible to coach or to teach people that type of agency that you have?

• 15:59Speaker 00

  Yeah, I do. I think that, you know, someone asked me last night, you know, that similar question. And I said, you know, I'm a person like a lot of other people. I was a very shy, quiet, laid back kid and really came into my own through work. And, you know, those part time jobs I was telling you about and the desire to be somebody in this world. And know that my only way out, I wasn't gonna make the NBA. I love basketball, but I wasn't gonna make the NBA.

• 16:34Speaker 01

  Yeah, me neither.

• 16:35Speaker 00

  Right. So I said, you know, what can I control? I can control how hard I work. I could control desire to do something and make a difference. I can control that. And so I got a lot of confidence from work. And, you know, other people might get confidence from something else, and that's fine. But I think it's so important to be connected to work, especially work that ties to people. Because when you know how to deal with people, and in the deli, I had 500 of them a day. You start to get a good feeling. And a good understanding that if you really listen,

• 17:16Speaker 00

  if you really care and you're really there, present, and not just going through the motions, there's people that want to connect with that kind of person. And so I really do believe that you can teach that, but you do have to practitioner, you know, those ideas, you have to be a part of the process. And I think so much is done today on the beautiful mobile phone in your hand that it's replaced, you know, the human side of the connection. I, like you, I've got one in each pocket and I value them because they make me more productive

• 18:00Speaker 00

  and happier because I can do those things. But we really do have to train people. We have to make them do it, where they actually have to simulate and be trained and be certified and understand and be coached well, so they have the confidence to get out there and be in front of other people where they can lead and make a difference. And I'm convinced that they can do it. Yes, there are differences. Some people are more skilled at it naturally, innately, no question. But more people are capable of more things than they realize.

• 18:39Speaker 01

  That's very encouraging. One thing that also struck me as soon as I asked you the question about like leadership in the age of AI was your immediate reaction. I said, you know, something that's a very common sentiment. It's the pace of change is scary. And your immediate reaction was like, well, it's also inspiring. It's a very like positive attitude for especially for, you know, someone running an amazing, incredibly adorable platform company where you're also facing more questions than you have previously.

• 19:10Speaker 00

  Sure.

• 19:11Speaker 01

  How do you think about like, you know, in getting everybody at your company or encouraging other people to have that type of reaction to change? That it's all an opportunity.

• 19:21Speaker 00

  Well, for one, I agree with you that a lot of people are frightened of change to begin with. The era of AI has disrupted every industry, every business, every person. And everybody needs to really rethink.

• 19:41Speaker 00

  Everything. And it seems to be coming all at once. So my approach to that was to lean into it. And one of the ways we did that here is put together a white paper on the blueprint for agentic business, which I'll happily give you a copy of today, and train them on, you know, what is the difference between a language model and an enterprise platform? Not saying better or worse, they're both important. They're both extremely important. And one actually makes the other stronger. But if you don't know where one begins and one ends, it really is kind of confusing for people. And that was a big unlock.

• 20:25Speaker 00

  I literally had CEOs tell me that that white paper actually let them see the world totally different, that there were many things in it that they didn't know or didn't realize. One such example would be, you know, let's take an example that's real. Every company today has a compensation issue. So, okay, we have a compensation issue on aisle seven in XYZ Corporation. The language model will do a great job of telling you, in a compensation situation like this, please consider step one, two, and three. Excellent. Does it in milliseconds. Fantastic.

• 21:09Speaker 00

  Only problem is, it doesn't actually close the case. So now in aisle seven, we gotta have the data, the context, and we'll have to go in and out of several different iterations of departments. Because let's assume it's a salesperson in aisle seven. And oh, by the way, that's connected to the HR department. And because it might be a problem, probably finance is involved in it, or legal, or compliance, or risk. And now we have data and a workflow that's gone through many different iterations, databases, and functions to come back and remediate the issue and close the case.

• 21:53Speaker 00

  That's what a workflow platform like ServiceNow does. And it was also important to have AI think, but workflow acts. That's an unlock for a lot of people. Another case example would be, hey, you know, I'm a bank. I've got 15,000 of my own engineers. My CEO is under pressure from the board to come up with AI use cases. The board meeting is coming up in 60 days. And I gotta look like I got all my story straight on what we're doing to infuse AI. You agree that that's a common thing, right? Very common thing. Okay.

• 22:35Speaker 00

  So one thing would be AI and some of the AI code out there is fantastic. And it can write new code very beautifully and set up the engineer for success and get things done at a speed never before done in the world. It's also true that that net new code comes at a cost. Because the cost to replace an enterprise platform in this SaaS apocalypse that people talk about is an extraordinary expense to try to match what some of these really important enterprise platforms do. Because you'd have to rebuild it. You're getting a model.

• 23:20Speaker 00

  I'm gonna write code now, so I'm rebuilding your model. Let's take that cost. And then let's take the cost associated with the human capital doing that instead of something else, because the platform was doing the work for you. And then let's add up the cost of the GPU factory, the business model associated with the language model company, and the tokens that will materially affect their business model. We've actually done the math on this. And so for a simple application on our platform, it would be 10 times greater in cost to try to replicate it with a language model.

• 24:01Speaker 00

  Now, the other thing about that is, if I give you the language model and it makes a mistake, you call me up and you say, hey, Bill, the language model made a mistake. And I say to you, the language model works. And you say, yeah, it works, but it made a mistake. Well, it's probably right, but it's not deterministic. And incidentally, it doesn't have the context of all the data that has materialized in the company and our relationship for a couple of decades now. And so what we're learning too is people that run businesses understand that people make mistakes. They never will forgive software for making a mistake.

• 24:44Speaker 00

  So we're kind of in a situation where at a very small fraction of an IT budget, a premier platform is a bargain. And to combine that with AI and the things that AI can do, you get the best of both worlds. You get more innovation, better integration and a better outcome. Try to build it yourself at a 10x higher price and then you have a problem. And I just tell you that the model works because I just gave you the model. You don't have someone to call to fix things.

• 25:17Speaker 01

  I think a lot of the SaaSpocalypse discussion ignores the basic fact that I don't think most businesses want to build workflow software for everything they do internally. And I do think they want somebody to be responsible for it. And I think it takes a lot of energy to go gather that context today. It is not an automated thing. And maybe it'll become more automated, but that all resonates for me. I will have to ask you, you know, so LMS, they can, in the traditional interaction mode, they give you an answer when you ask a question, right? Now you have long horizon agents, maybe you have computer use.

• 26:01Speaker 01

  People can use applications with these models. Does that change your thinking at all?

• 26:05Speaker 00

  No, I think we lean into it. You know, our perspective is these language model companies are fantastic and they're very important and they're going to do fabulously well. We said the same thing with the hyperscalers. You know, it wasn't that long ago that people were like, hey, you know, why wouldn't the hyperscalers just eat software? Because everything is going to go to a workload in these great hyperscaler companies. And they are great companies.

• 26:32Speaker 01

  Yeah.

• 26:32Speaker 00

  They're fabulous companies. And so our perspective was we have to be.

• 26:39Speaker 00

  The AI control tower for business reinvention that integrates with all the hyperscalers, with all the language models and all the systems of record because they too are important companies and the data that resides in them is very important. So if we can be that fabric that connects all those nodes, now we can help you run a true agentic business. And on top of that, we made the move into security, not because we're going to do all things in security, but because US is the world's largest economy, China is number two, and cybercrime is number three.

• 27:24Speaker 00

  It's a one trillion dollar a month problem. And so we feel that being able to integrate to all the good security platforms, but manage IT and OT, which is the operating technology, with Armus now becoming a part of Service Now, we're going to give corporations the ability to have a full purview of the whole landscape. And so, for example, in operating technology, you know, it could be networks with devices attached to it. It could be manufacturing with various tools that are or aren't on a network where AI can or may not even see them.

• 28:05Speaker 00

  It could actually be medical devices in a healthcare situation. It could be a world's prestigious bank managing critical infrastructure, which includes the people, places, things, but also the building and the things in it. To have all of that in one automated AI platform for this reinvention of your business is pretty compelling. So. It's all there now. And I really like see such a future and such growth in all of these businesses, our core and what we've extended it to because we're a native AI company.

• 28:50Speaker 00

  Even the platform itself now is autonomous. And you know, you've seen what we did with Move Works, the agentic front door to the enterprise and Vesa, which is human and non-human identity. And now the security move with Armus on top of an unbelievable core. By the way, we integrated these businesses in 20 days, 20 days. So a lot of companies don't have the engineering power to say they can do hard things quickly. But you know, we're blessed with some real talent here.

• 29:21Speaker 01

  It's very impressive. I have sold companies to, you know, large enterprise software vendors where it takes like a year and a half of rebuild to get some value out of it.

• 29:30Speaker 00

  Totally.

• 29:31Speaker 01

  Yeah.

• 29:33Speaker 01

  I think it's a really good historical reminder that people forget that there was this fear about the hyperscalers as well, which as you mentioned, have become very important to all of our businesses. And yet have not replaced the need for, you know, workflow software and platforms.

• 29:51Speaker 00

  Yeah, as you said, you know, actually are very good partners, you know? And on the back of ServiceNow franchise, get billions in workloads into those clouds. And they're all such great companies, but they all tend to do different things super well. So for the customer to have choice is also a great idea, just like they'll want choice on the language models. And us not standing in the way of that and giving choice, but acting as that control tower is a huge competitive advantage or differentiation, whichever your perspective might be.

• 30:29Speaker 01

  Do you think there's any segment in enterprise software that is at risk from generated code and agents?

• 30:37Speaker 00

  I think that it's true.

• 30:40Speaker 00

  That there will be companies that will be at risk. It's also true that they theoretically should be more valuable because of the data and the context around that data. But if there was a risk, I believe it's more departmental companies. So if you think about companies that do something that span multiple departments or are a serious system of record that is very hard to replicate, they're safe and they'll be a part of the future. If you're serving one function and what you do is not tremendously high value add,

• 31:24Speaker 00

  and it might not even be a high up on the priority list of a CEO, I think that that would be the chance where the vulnerability equation really rises quickly. We're fortunate in the sense that we go end to end on a horizontal and north to south on a vertical, up and down the stack and across the enterprise. And I think that's a pretty huge moat. And right now, I believe the last time I looked at it was more than 85 billion workflows are in flight as we're having this podcast. And we got seven trillion transactions happening on that platform.

• 32:07Speaker 00

  And it's representing the most important brands in the world. And that's not only something we're proud of, but it's also a serious responsibility because those companies can't miss. And that system always has to be there for them. And fortunately, it is.

• 32:21Speaker 01

  You uniquely have run two companies that are just clearly platform businesses, SAP and ServiceNow. Do you have a definition in your mind of what makes something a platform business? Because I grew up as an investor in the age of SaaS.

• 32:35Speaker 00

  Yeah.

• 32:36Speaker 01

  And, you know, rise the cloud and everything. And it is, I think it was wonderful for innovation that you could build like.

• 32:45Speaker 01

  Sort of features that turned into companies, right? Software workflows that were sort of tangential to a system of record, for example.

• 32:54Speaker 00

  Yep.

• 32:56Speaker 01

  ServiceNow originally began with like IT service desk.

• 33:00Speaker 00

  Right.

• 33:00Speaker 01

  As the workflow. But how do you, how do you think about like how the positioning is? And the actual work is very different now. And then like, you know, how, how you got there?

• 33:11Speaker 00

  Yeah. I think that had we only done what you rightfully point out, which had been an IT service company as an example. That might've been a system of record for the IT department. But I think when CEOs look at a corporation and they say, what are the needle movers? Those are the companies that, since you mentioned the two that I work for. You know, one is running the financial system of global corporations of mass scale in multiple currencies, geographies, industries. And it's really kind of thorny and complicated to even think about removing something, especially

• 33:55Speaker 00

  something that's probably been mass customized for the unique attributes of that business. So the investment scale was great. The switching costs are very high. I think you would consider that a platform. And I would say the same is true in a certain sense for a company like ServiceNow, but for a different reason. Yes, it's a system of record for all the things IT and the services that it provides. But it's even bigger than that in the sense that all of the other systems of record integrate with it. So now you have roughly 800 of the more substantial systems of record that integrate into it.

• 34:38Speaker 00

  And because of our in-memory, open source data platform, so it's built on the open source technologies, but its speed, its scale, its ability to ingest data, we could take as much as you give us. But similarly, you might say, okay, you know, I'll give you your core IT and OT and I get the holistic end-to-end process, but you know, I have data lakes, I have hyperscalers, I have language models. What about in the flow of work or a business process? What can you do for me if I don't want to put it in service now? Oh, we make a zero copy. And then the transaction is complete, done and dusted, nothing moved.

• 35:21Speaker 00

  There was no risk associated with it and it works. So I think that is a mission critical platform in the execution of work and the basics of getting things done. What's unique about it is you can change the business process instantaneously using the AI tools that are resident in the platform. So if you want to build a net new application, you can do so. If you want to see how the business process would change in a knowledge graph, you can do so and you can see how that change impacted the processes

• 36:01Speaker 00

  and the way work flows and all the individuals impacted in the corporation in real time. So I think the the motion of that is very, very hard to replicate, both on the history of it, the bandwidth of it, and also what we have designed in terms of the systems capabilities. It's it's very unique.

• 36:25Speaker 01

  One of the things that makes workflow platforms so sticky is the the organization, beginning with IT, learns how to deploy workflows on it. And as you said, maybe they can do it even more instantaneously now.

• 36:42Speaker 00

  Yeah.

• 36:44Speaker 01

  The cost to implement new business processes, integrate, customize, has always been very high for enterprises. Is that decreasing with AI? Is that like a advantage for you, a concern for you?

• 36:58Speaker 00

  It's a great question. It's actually a big advantage because we were always quick to implement. You know, nobody has time for multi-year projects. You know this. And the customer wants to get the value really fast. And with autonomous platform like we have now.

• 37:17Speaker 00

  Um. We have major customers, big ones, that are going live in less than thirty days. Big ones. And so, think about it. You know, if you go back, as you mentioned, you know, think about the financial crisis era and the scale even then of SaaS applications. If they could have been implemented in less than thirty days, everybody would be doing a rain dance with happiness. Um. It took months. And to think that you can do things, big things, complex things, in less than thirty days, and in some cases even faster. And it's all modular. So you can get your quick wins and just keep going. Um. You know, some people thought that the SIs, you know, would be hurt by this. But the difference

• 38:02Speaker 00

  is they actually have many more projects now that they can do much more quickly.

• 38:06Speaker 01

  Oh, that's what you're saying.

• 38:07Speaker 00

  Yeah, I I'm saying much more quickly. Everything is happening much faster. The customer's ROI is better. I'm a big, you know, proponent of a native AI company. And everything we do is about being a native AI company. Every change we make is because of AI. And some of those things, you know, they change business models, they change the way humans actually work in the company. For example, you know, ninety percent of our customer service cases now are managed by agents.

• 38:38Speaker 01

  Uh huh.

• 38:39Speaker 00

  And, you know, that that means like only ten percent are actually involving people. And so there's a lifting and a shifting and a changing of the guard in terms of what people do for the critical thinking and the judgment calls that they have to make instead of the tactical, you know, work of just grinding out details. And I think that makes people happier in the work, but it also does change the work.

• 39:06Speaker 01

  If you were to fast forward five years, like, what do you think is different about the employee base at ServiceNow? Or even like the work being done?

• 39:15Speaker 00

  I think that in terms of employee base, I think you're gonna see that the net new added headcount.

• 39:22Speaker 00

  Will be dramatically reduced.

• 39:24Speaker 01

  Uh huh.

• 39:24Speaker 00

  And that's because the company will be far more productive. The agents are real.

• 39:30Speaker 01

  Uh huh.

• 39:30Speaker 00

  And they will take on a tremendous workload. So where to keep up with growth in a growth company like ServiceNow, you'd have to hire thousands of people in finance and HR and the supporting functions and services just to keep up with it all. And now the agents are going to be able to do a lot of that. So you're going to invest in things that really matter, like humans that engineer great innovations and that humans that actually manage the relationship and the importance of human to human connection, building trust, making promises and keeping them and enduring a relationship and the net present value of loyalty in that relationship. That's all going to be human.

• 40:15Speaker 00

  But I can see a company where, you know, you don't have to really increase headcount to achieve that goal. And I do think that the bar got raised in terms of differentiating your skill set and making sure what you're capable of doing can't be easily replicated by an agent. Not just at ServiceNow, but in all businesses. If an agent can do it as good or better, that's an easily easy economic decision to make, which is why, you know, there'll be 2.2 billion of these agents entering the workforce in the next couple of years. So, you know, there's going to be a lot more agents than there will be people.

• 40:59Speaker 01

  When you think about, you're just describing, you know, ServiceNow is growing about 20%

• 41:03Speaker 00

  Yeah.

• 41:03Speaker 01

  A year.

• 41:04Speaker 00

  Yeah.

• 41:04Speaker 01

  13 plus billion in revenue trailing. So massive business, growing at scale. I think one of the things that's so interesting about this SaaSpocalypse narrative is, you know, many of the companies as described are actually like doing really well on fundamentals. What are the signals you look for in your own business besides, you know, what customers tell you they want to do with you?

• 41:30Speaker 00

  Right.

• 41:31Speaker 01

  Like quantitatively or otherwise that say like, what we're doing in AI is working.

• 41:36Speaker 00

  Well, the most important thing is we've expanded the boundaries of the platform. So we have a company that's operating.

• 41:45Speaker 00

  Globally, we operate across multiple industries. In the companies that we serve, we serve everything from IT to the employee experience, to our fastest growing TAM, customer relationship management, obviously all the work that the creators do, and security, as I talked about. So what I'm looking for is the adoption of the AI control tower for business reinvention. And are we the agentic front door to the enterprise? Are we managing the humans and the non-human identities? Are we connecting in the workflow data fabric, all of the nodes that are operating in an

• 42:29Speaker 00

  enterprise? Whether it's a data lake, a hyperscale, a language model, a system, a record, all those things should go through the central nervous system, which is ServiceNow. And obviously, when I think about OT, we know the people, we know the places, we know the things. When I think about OT, we actually know the networks, the devices that reside on, on the critical infrastructure, the shadow IT, the disconnected controllers, in the case of a manufacturing company, as an example. So this amazing real-time insight and visibility into how that company is running and how we can make that company run better. That's the ethos of everything in terms of the customer relationship, that we know

• 43:11Speaker 00

  more, that we care more, and that we can do more for that customer than any other enterprise company in the world. That's the game plan. And, you know, for my money, what else do I look for? I look for the AI and the assists that the agents are doing to help the humans in the companies we serve. And I want to see that the trend line of those assists and the consumption of that innovation is really going right and up to the north side of town. Because by doing that, you've solidified your position as super important to the way

• 43:55Speaker 00

  the company actually runs. And not to mention the fact that the shareholder value creation takes on a whole new meaning once you kick in that consumption model on top of everything else.

• 44:08Speaker 01

  When you talk to like this amazing enterprise customer base that is deeply embedded with you, and then, as you said importantly, trusts you and trusts you to do more all the time, what is the state of play in terms of, you know, you described a very forward looking vision for what AI can do to transform enterprises, like where are people today? What are the first questions they ask you? Do they believe it?

• 44:28Speaker 00

  Yeah, I think that's a great point because most people today know that they have to do something with AI, but like in the case of Brazil as an example, only 11% of the companies, since that was last night's meeting, have actually gotten past the experiment phase where they're doing experiments. And so we're seeing now the companies are going past the experiment phase into mainstream, I'm building the agentic business, I'm building the agents to complement the humans, and I'm driving business model innovation and

• 45:08Speaker 00

  efficiency. That is now picking up steam, but you have to remember, it's a very diverse set out there. I mean, in public sector, they're just basically now trying to consolidate complexity and get one department to speak to another department, so we don't have billions of fraud getting through the cracks. Other industries, like healthcare as an example, we're now moving into the modernization phase, so the patient experience isn't so miserable because the professionals that work there are great, but the systems have been holding them back. But if you look at a financial services firm, for example, you know, they're

• 45:51Speaker 00

  moving full, full speed on what can I do with AI to fundamentally rethink how I run my company, to manage my headcount better, to get more done with a lot less. So it's kind of based on industry, based on GO, different GOs have adopted it more quickly. The US is the leader in terms of consumption and adoption of AI, and they're moving faster. I give you a flavor, some of the industries, but I would say that it's more about modernization as a standard, and the first movers now are moving out with AI, and they're aggressive, and they're going for it.

• 46:31Speaker 01

  When you think about like what going for it means, are there a set of use cases that are universal across companies? Or are there different things that matter to the different segments?

• 46:42Speaker 00

  I think that they're looking at their business model. And what can AI do to change my business model? The ones that are first movers or early movers. And headcount is definitely on the table. Obviously, if you believe in the agent world and you do increase headcount, it's because you can see that the heads are supporting the digital transformation and the inclusion of the agents and there's more revenue to be gotten by adding them.

• 47:14Speaker 01

  Yeah, there's ROI on it.

• 47:15Speaker 00

  Exactly. And they're not going to add them anymore, meaning people, without a clear ROI case. And in many cases, a lot of these companies, especially if you look at the years 2020 to 2024, they hired a lot through COVID. Not a lot of people talk about this. I haven't actually heard anyone talk about it, but when they did the hiring and everybody had a hand in this, a lot of it was virtual. A lot of it then was, you know, keep the people. We need the people. You know, there's a crisis out there. And now they've realized they've layered up the companies.

• 47:57Speaker 00

  Some of the people maybe didn't get as close a look as they should have because, you know, Zoom was the way to meet them, greet them and hire them. And now with the inclusion of AI in the business model and the innovation of the companies, it's kind of like, how do we get leaner? How do we get smarter? And if AI does make us better, we should see that in the ultimate profitability of the company, the revenue per employee of the company. And the company should have expanding margins, expanding or re-accelerating revenue and should be in a more exciting growth story than it was two, three, four, five years ago. So there's high expectations for what AI can do.

• 48:41Speaker 01

  What is the biggest thing that's changed in customer conversations for you about AI over the last year?

• 48:46Speaker 00

  Right now, I think it's just tell me what I need to know. It's not like, let me come in and discover your problems. Or let me bring you a solution because I have one in my pocket and I can't wait to share it with you. It's like, you know my business. If you don't know my business, there's no conversation. But let's assume you know the business. Be very prescriptive. Tell me very specifically. At the macro level, depending on the level you're talking to, how do I transform the company in keeping with the CEO vision or the management team's vision? At a departmental level, you really understand whether it's sales, it's human capital, it's engineering,

• 49:32Speaker 00

  or it's technology or CTO and its orientation. You really understand the landscape and you have very quick solutions that can get up and running and deliver the value in a highly predictable manner. And it's AI driven. Like they have to have AI in there because they know the AI is the force multiplier. And so I would say the dance has gotten brief. The execution is where they want to spend their time. Get me there fast.

• 50:06Speaker 01

  A pretty impatient set of customers.

• 50:07Speaker 00

  Very.

• 50:08Speaker 01

  But they're, it sounds like they're pretty decisive, given the parameters.

• 50:11Speaker 00

  Real decisive and, and real fair. I mean, you know, very open minded. If you can help me, do it because I need the help. Everyone will tell you they need the help. They're not telling you they have all the answers. So it's our job, again, to know more about this than they do. Otherwise, why do they need us in the room? And then you have to have a position that you take that brings something unique and variable to the equation. I always tell people, if two people are in the same room at the same time with the same opinion, one of them is redundant.

• 50:45Speaker 01

  I wanna, well, I wanna close up with like two, maybe more personal questions. You have a lot to cover with ServiceNow, but you're also just an interested, interested guy. What inspires you or makes you curious in AI or elsewhere in technology outside of what you're doing with ServiceNow?

• 51:05Speaker 00

  Well, I'm fascinated by so many things.

• 51:10Speaker 00

  What really interests me in technology is how it will truly improve the world, the human condition. It could be an environmental conversation. It could be what we're seeing happening in outer space. It could be a global corporation trying to do unique things in a world, in new places that they've yet to conquer, but they can do so with technology now and AI. And they can simulate a presence that might not actually be physical, but it could be unique, virtual, and new. There's new routes to market, there's new channels, there's so many new things that could be done.

• 51:50Speaker 00

  So I think that this is the era where everything really does evolve and possibilities exist where there just wasn't possible three, four, five years ago. So I find that, you know, it goes back to the quote that I put in the book, since you mentioned what is dream. When the great Robert Kennedy once said, you know, "Some men see things as they are and say why. I dream things that never were and say why not." So I always try to look at things that didn't exist or don't exist with the application of technology or just a great dream. What's possible?

• 52:28Speaker 01

  And then in terms of just the day-to-day in between your dreaming, what does the day in the life of Bill McDermott as Service House CEO look like?

• 52:40Speaker 00

  Well, it depends on where you're physically at at the time, based on what you're doing, because the time zones are all different. But if you're in California, which we are today together, you know, you start your day off. It's really easy to understand this. With Europe, you migrate yourself then to the United States and you wrap up with Asia. So you always have to keep the tempo around the time zones and what's happening in the global economy. I just try to be a global person and be a leader that's involved in all dimensions of the company in any time zone in the world. So that's one aspect of it.

• 53:21Speaker 01

  And you're talking to your teams there, hearing what's going with customers, what's going on with them?

• 53:25Speaker 00

  Today, I've been in two out of the three with the regions of the world and I'll finish up with the third. And absolutely, I want to hear what's going on with them, what's going on with the customer, what's going on with the business, what's going well, what's not going well, based on where they're at, at any one moment in time, I can see and I feel things very deeply and I'll offer my suggestions. I try not to make the decision for everybody, but I'll offer my suggestions just on observations. And then we have an open, honest, riffing relationship on ideating on something and then ultimately we get someplace quick. There's no time to screw around. We got

• 54:10Speaker 00

  to get to the point and move on. A lot of time with customers. I feel that I really get grounded with the customers and understanding what they're trying to accomplish and how I can help them. And a lot of people talk about sales and the idea of running corporations. It's all based on the customer and the customer alone. They determine whether you win or lose. And if you never lose that in your heart, you're closer to success than failure. The other thing is I listen to the employees. For example, yesterday I started my day with 17 conversations with 17

• 54:55Speaker 00

  quota carrying reps.

• 54:57Speaker 01

  Wow, that's a lot, okay.

• 54:58Speaker 00

  Seventeen. And I got 72 on my calendar this month.

• 55:03Speaker 00

  Seventy-two.

• 55:04Speaker 01

  Okay.

• 55:05Speaker 00

  And it's inspiring because anytime you need to feel like, feel good, talk to the people that are closer to the customer and you realize just how great your company is, how great the people are, how smart they are. And, and you know, they have so many good ideas and they're doing so many good things. You know, one woman said to me yesterday, you know, she was most proud of the health check of her customer. And she told me all about the customer, the health check is our heuristics around customer satisfaction, the performance of the system and so forth. And it just inspired me. And then, you know, always try to do, you know, one-to-one, one-to-few and one-to-many.

• 55:50Speaker 00

  And last night I, you know, wrapped up my day with eight hundred executives from Brazil. And it was like amazing. And they wanted to, you know, talk about leadership and many of the things that, you know, you want to talk about. And I think everybody is in a, in the mode right now where they want to learn, they want to experience what you think and they want to grow. And they are uncertain. And to some extent, you know, they don't have all the answers and sometimes they're even afraid. And I explained to them, you know, don't look for the escape hatch. You know, this is the moment.

• 56:29Speaker 01

  Mm-hmm.

• 56:29Speaker 00

  When leaders really matter. Because as the waters get choppy, you know, we see who's tough and who's not. And when the tide goes out, you want to be fully dressed. And even if things don't look so good, you'll figure it out. If you're fully dressed and you're ready for the battle. And I think that this is bringing out the best and real leaders. And I live for this moment.

• 56:56Speaker 01

  You seem like a leader for that moment. And I love the confidence that you have that other leaders want to meet that change too.

• 57:01Speaker 00

  Thank you, Sarah.

• 57:02Speaker 01

  Awesome. Thanks so much, Bill.

• 57:04Speaker 00

  It was an honor meeting you and spending this time with you. Thank you very much.

• 57:10Speaker 01

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