AI transformation, NOW

[WillO2028]

I re-read Service Now’s Q3 and dug in some on the Company these last few days.

I’m wondering if anyone here has come across any red flags?

I’ll add here what I thought were some of the Call highlights:

Gina Mastantuono, CFO

… Q3 subscription revenues were $2.715 billion, growing 22.5% year-over-year in constant currency, exceeding the high-end of our guidance range by 200 basis points.

RPO ended the quarter at approximately $19.5 billion, representing 33% year-over-year constant currency growth, accelerating both quarter-over-quarter and year-over-year. Current RPO was $9.36 billion, representing 23.5% year-over-year (this does not mean at least 23.5% rev growth this year is baked into guidance) …

… (Customers spending) $20 million or more grew nearly 40% year-over-year, powered by large deal momentum.

Might be behind Seeking Alpha pay wall, here:

ServiceNow, Inc. (NOW) Q3 2024 Earnings Call Transcript

NOW reported 85% of the S&P as customers in prior Calls.

Back to Q3 a week ago,
William McDermott, CEO
Using ServiceNow single architecture platform and cross enterprise data, ServiceNow AI agents can uniquely advance beyond pro-based activity to deep contextual comprehension. This is like hiring an additional workforce to support people by doing the jobs they’ve never wanted to do in the first place.

We intend to be the control point that governs the deployment of Agentic AI across enterprise.

… We announced an expanded strategic alliance with Zoom (Nice to see a cutting edge Tech Company as one of their many examples) to integrate our Gen AI technologies, and we’re just getting started.

Together, NVIDIA and ServiceNow are developing (and selling, as seen this Q) out-of-the-box use cases for AI agents on the Now platform using NVIDIA NIM Agent Blueprints. Customers simply turn on these capabilities and start reinventing workflows across the enterprise for small single issue resolutions, all the way to entire incident response workflows.

You heard acknowledge that ServiceNow launched RaptorDB, our new ultrafast database built for AI-first enterprises, which processes transactions 12 times faster, analytics 27 times faster. Customers, including Amadeus, are already in the process of implementing RaptorDB, to supercharge processing speeds across their global systems. Our data ambition doesn’t end there. We are expanding deeper with our new workflow data fabric, which will unify business and technology data, so it flows seamlessly across the enterprise.

Workflow Data Fabric also includes zero copy partnerships with established leaders like Databricks and Snowflake so customers can turn data into instant AI-powered action, all on the ServiceNow platform.

One of the world’s leading professional services company is Cognizant became the first systems integrator taking workflow data fabric to market. These innovations open the door to massive market opportunity for ServiceNow, nearly doubling our TAM to $0.5 trillion.

With all this momentum, it’s no surprise that our recognition is also growing. The American Opportunity Index assesses how well employers develop their talent. We have learned that ServiceNow will be the highest ranking technology company again this year, ranking fifth overall among 400 brands. well we promote and build the careers of our

This brings me to the final tailwind. The best people want to be at ServiceNow. I’m very proud to announce that Amit Zavery, will join ServiceNow as our President, Chief Product Officer and COO. … With Sterling educational and career credentials, Amit is a world-class engineer and engineering leader. From commercialization perspective, he’s also an expert in packaging and pricing. With a compelling vision for AI business transformation, he is hungry and humble to his core.

QnA

Bill, CEO

“ServiceNow has become the standard platform for federal agencies as they’re looking to consolidate contracts and standardize on a single vendor to drive digital transformation.

The Gen AI race is one that we’re winning, first mover, and we intend to run the table.

And in terms of when the product is coming, they’re out. So you got Now Assist in full flight, you’ve got RaptorDB in full flight, Q4 will be a big quarter for that. You got the workflow data platform, which I explained, which works now, and it will continue to evolve and be a big part of our future and you have the front office where wins are happening every day, and we’re beautifully led there, and we’ve got amazing dreams and then take all the core stuff with the upsells and the and the cross-sells cohorts that Gina talked about, and it’s just so much in front of us, we feel like a scale company with the heart of a start-up. And that’s kind of motion that’s running through ServiceNow, now. And tomorrow, when we get to ServiceNow Live, which is an iconic cultural event that we do every quarter, I could just imagine the seats are going to be rumbling all over the world.

And then you say, what else are you going to do? And it’s really the front office, everything else is still going full pace, but the front office is getting a step function increase in terms of its focus and the innovation and the execution because it’s the biggest TAM and because we’re winning everywhere we go, we think that, that can be like a major catalyst.

It’s a lot and out of context; but, Did I say they have 85% gross margins?

Again, please let me know I any concerns.

My Portfolio:
Tesla 34.55%
Nvidia 31.54%
Pure Storage 10.16%
Service Now 9.02%
Zscaler 8%
Snowflake 6.73%
Cash 2%

Best,

Jason

[rhill0123]

I received a call from a McKinsey consultant today who mentioned in our conversation that she was very impressed with NOW’s AI software. She said that the firms she works with (F500) are finding it saves 1.5 days of work per week (per agent? – I wasn’t educated enough to understand).

I must confess that I always thought of NOW as an IT help desk provider. Sounds like big moves are afoot. Revenue growth acceleration has been a big driver of returns for stocks, could ServiceNow be a beneficiary? It’s on my watch list.

Rob

[WillO2028]

In this most recent NOW Q3, NVIDIA’s CEO, Jensen Huang was quoted by Bill McDermet, CEO of Seevice Now as saying, “ServiceNow is the operating system for enterprises."

I remember him saying that. I believe he said it when Jensen was interviewed with Bill McDermott, CEO of Service Now and Michael Dell a few months ago. I can’t remember where.
From my notes:
Jensen emphasized ServiceNow’s crucial role in enabling digital transformation and workflow automation across various industries. Huang highlighted ServiceNow’s platform capabilities:

I believe Jensen also made some key points about Service Now:

1. Streamlining business processes

2. Enhancing employee experiences

3. Automating workflows

4. Integrating artificial intelligence and machine learning

I believe Huang’s endorsement underscores ServiceNow’s significance in modern enterprise infrastructure.

Best

Jason

[anthonyms]

FWIW - I see ServiceNow as the closest example of a company following the SFDC analog case study of a category crushing leader with durable SaaS revenue growth with a monster TAM that is still expanding offering a runway to decades of returns. I see Palo Alto and Datadog and to a degree The Trade Desk in a similar way but further behind in their stories.
Ant

[WillO2028]

Hi Ant,

I appreciate you Take on Palantir. As you can see in the lead post here, I sold Palantir before Earnings🤪. I didn’t believe that the print would match the expectations and wanted to get into Service Now.

In addition to thanking you … I found the quote of Jensen Huang, CEO of Nvidia I reference in that same post above … and it’s better than I remembered.

Today, I sold all my 6% position in Snowflake to add a 3/3 to Service Now, making it a 15.88% position. I agree with Jensen when he recommends, ‘It’s time to get on the AI train. The fact is AI has grown 1M X in the last ten years, there’s no benefit looking at it from the station house.”

Jensen Huang, CEO of Nvidia say in the following link, “ NOW is NVDA’s A.I. “. It takes place at the Service Now Annual Event 4 months ago, Knowledge 24.

Jensen Huang at the ServiceNow Knowledge24 Keynote

NVIDIA’s CEO, Jensen Huang, spoke as a Key Note Speaker and praised ServiceNow, stating at the 10:50 minute mark, the admonition.

Jensen spoke incredulously,
“ServiceNow is the operating system for the World’s enterprises.” And, “The platform for Nvidia employees, the operating system of Nvidia, is Service Now. I had always hoped Nvidia would become an AI, and what I realized I needed to do was make you (Service Now)an AI and we use you (Service Now).”

It’s a short watch and impactful to the last word, IMO.

Best

Jason

[anthonyms]

Jason - one point to note that the Monday results have just reminded me of is that their new module Monday Service is in beta version and apparently is going extremely well. They anticipate going into General Availability in Q4.

In the same way that SalesForce has continued to survive and grow despite the arrival of smaller enterprise competition (Hubspot, Veeva, MondayCRM etc), I’m sure ServiceNow will withstand Monday however they have said in their earnings call that they expect i) Very rapid uptake of MondayService and ii) Massive cross sell of Service into the existing Work O/S customer base.

Something to watch particularly as Monday appears to be really going after Enterprise now rather than SMB.

Ant

[WillO2028]

Hi Ant,

Thank you for bringing up Monday. I’ve been a fan of Monday for a long time.

I’m going to continue to believe that, with all that I’ve written above on this thread - with Jensen Huang sting that, “Service Now was the first Enterprise Software Company to offer full stack with Gen AI.” And also Bill McDermott, CEO of NOW saying in Q3 ER, “in terms of when the product is coming, they’re out. So you got Now Assist in full flight, you’ve got RaptorDB in full flight, Q4 will be a big quarter for that.” And given Nvidia choosing Service Now, I just can’t imagine any enterprise thinking, “hmm … lets go with the new guy.”

I’m not making any changes in my portfolio, not right now.

I’ve trimmed Tesla to keep it around 30%
Nvidia stays at 30%
Service Now stays at 15%
Pure @ 9%
Zscaler @8%
Cash 8%

[WillO2028]

Announced today: ServiceNow and Microsoft Expand Strategic Alliance to Modernize the Front-Office With Copilot and AI Agents

Microsoft Copilot and ServiceNow AI agent collaboration will bring together two leading AI offerings to drive maximum value across every corner of a business.

(Me: this focuses on the ‘front-office’, the largest TAM per last NOW ER, not yet added to the $0.5Trillon est.TAM).

The news builds on years of partnership bringing new advanced cloud and AI capabilities to customers in their flow of work. Initial use cases include employee and IT scenarios where employees working in Microsoft Teams can use Copilot to search the ServiceNow knowledge base, request service catalog items through a guided, conversational experience, and ask to chat with a live agent when a case needs to be escalated.

Now Assist provides employees with responses to questions as well as recommended actions and next steps in a conversational manner based on domain knowledge of the enterprise and awareness of the user’s context and organizational data from Microsoft 365 chats, email, calendar, and files.
Guided by strong governance and human oversight, these front-end agents will solve customer problems in Copilot to seamlessly connect back-end workflows. Copilot will streamline user tasks through intelligent automation, while ServiceNow AI agents orchestrate workflows, providing real-time responses to complex issues, ultimately collaborating to execute tasks on behalf of employees.

Me: the orchestration of multiple AI Agents is where the greatest value add, in Software Infrastructure, was said to be by multiple discussions on The CUBE (IMO, a highly valued technical resource, powered by ETR).

Service Now is powered my Nvidia NIMs, what I believe is shaping up to become the standard across a future AI Agent harmonization layer.
Best,

Jason

[WillO2028]

NVIDIA NIMs (NVIDIA Inference Microservices) are certainly making an impact in the field of AI agent development, but whether they are becoming the standard depends on several factors:

Factors Supporting NVIDIA NIMs as a Potential Standard:

1. Ease of Deployment: NIMs offer enterprise developers an easy-to-deploy solution for AI models through optimized containers that can be deployed across various infrastructures like cloud, data centers, or workstations. This ease of use can make them a popular choice.

2. Industry Adoption: NVIDIA has a broad ecosystem with many partners integrating NIMs into their platforms. This widespread adoption, especially by technology partners for domain-specific applications, suggests a move towards standardization.

3. Performance and Optimization: NIMs are designed for optimized inference, which means they can provide high performance with models like large language models (LLMs) on NVIDIA GPUs. This performance advantage could position NIMs as a preferred method for deploying AI agents.

4. Versatility: The availability of NIMs for a variety of AI models, including those from NVIDIA and community models, means they can be used for a wide range of applications, from generative AI to digital biology.

5. Enterprise Readiness: As part of NVIDIA AI Enterprise, NIMs come with enterprise-grade security, support, and stability, making them suitable for production environments where reliability is crucial.

Challenges and Considerations:

• Market Competition: While NVIDIA has a strong position, other cloud providers, AI platforms, and hardware manufacturers also offer solutions for deploying AI models. Amazon Web Services, Google Cloud, Microsoft Azure, and others have their own set of tools optimized for their platforms, which might compete with NVIDIA’s offerings.

• Open-Source Alternatives: The open-source community provides numerous frameworks and tools for AI model deployment, which can be tailored to enterprise needs without the dependency on proprietary technologies. This diversity in options might prevent any single solution like NIMs from becoming the universal standard.

• Platform Agnosticism: Enterprises often prefer solutions that are not tied to specific hardware, allowing them to leverage whatever infrastructure they already have or prefer for cost, performance, or compliance reasons.

• Customization Needs: While NIMs provide a robust solution, some enterprises might require highly customized AI agents that go beyond what standardized services offer, leading to bespoke development or the use of other frameworks.

Conclusion:

NVIDIA NIMs are indeed becoming a significant player in the AI agent development space due to their performance, ease of use, and enterprise support. While they are not yet the definitive standard across all enterprise AI development, their integration into various platforms and the support from a strong ecosystem indicate a trend towards standardization, especially for NVIDIA-accelerated environments. However, the AI market is competitive and diverse, with many enterprises seeking solutions that might not align perfectly with NIMs due to existing infrastructure, customization requirements, or cost considerations. Therefore, while NIMs are influential, they share the stage with other technologies, and the term “standard” would depend on broader market adoption and the evolution of enterprise needs.

[WillO2028]

I should have posted the last post into an Nvidia thread, sorry. Here’s the one I meant to add here:

Yes, the integration of ServiceNow’s Now Assist with Microsoft’s Copilot can indeed be viewed as a significant step towards creating an enterprise-level harmonization layer for AI agents. Here’s why:

Interoperability and Seamless Interaction:

• The integration allows these AI assistants to interact seamlessly, passing data and natural language requests between them. This means users can start a task in one platform and continue or complete it in another without manual intervention, enhancing workflow efficiency.

Enhanced Productivity and User Experience:

• By integrating Now Assist’s domain-specific knowledge with Copilot’s capabilities within Microsoft 365 applications, employees can execute productivity tasks more naturally and efficiently. For instance, an employee can request IT support through Copilot in Microsoft Teams, which then interfaces with Now Assist to handle the request, reducing the need to switch between applications.

Customization and Flexibility:

• The partnership empowers users to customize their AI interactions, tailoring them to their specific business processes. This level of customization suggests a move towards a more integrated AI ecosystem where different AI agents can work together harmoniously based on organizational needs.

Market Validation and Ecosystem Development:

• Major players like ServiceNow and Microsoft collaborating on AI integration signal to the market the potential and importance of AI interoperability. This could encourage other software providers to develop similar integrations, fostering a broader ecosystem where AI agents from various vendors can interact, thus forming a harmonization layer.

Future Capabilities:

• The announced capabilities hint at evolving into more complex integrations, like using prompts from one system to create documents in another, indicating a future where AI agents might autonomously handle end-to-end processes across different platforms.

Enterprise Impact:

• For enterprises, this means streamlined operations where AI agents can work together to manage workflows, service requests, and data across different enterprise applications. This reduces the cognitive load on employees, speeds up processes, and potentially reduces errors.

However, while this integration represents a step forward, it’s part of an ongoing journey:

• Standardization Challenges: True harmonization across different AI agents from various vendors would require standardized protocols or APIs, which might not be fully addressed by this integration alone.

• Data Privacy and Security: Integrating AI agents across platforms necessitates robust data governance to ensure compliance with privacy laws and security standards, which is a complex challenge.

• Scalability and Complexity: As more AI agents integrate, the complexity of managing these interactions will increase, requiring sophisticated orchestration tools or platforms.

Thus, while the ServiceNow and Microsoft integration is a pivotal development, it’s more accurately seen as an advanced step within a larger trajectory towards a fully realized enterprise-level AI agent harmonization, where AI assistants from different ecosystems can not only communicate but also collaboratively solve complex business problems.

Best

Jason