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Interviewing Software & IT Leaders
"The rapid pace of development and innovation that has been brought on by this [SaaS] model has changed expectations and changed what's possible as well," Rhett Glauser, ServiceNow.
Rhett Glauser is Director of Corporate Communications at ServiceNow, a leading SaaS provider of cloud-based services that automate enterprise IT and operations. Chatting with Michael Ni, CMO/ SVP of Marketing and Products at Avangate, about SaaS - market changes, buyer expectations shifts, impact on the way providers are building their business and clients using the services.
Michael Ni: Welcome to the Avangate Software Leaders interview series where we continue to explore some of the top challenges driving the software and cloud services industry and the implications to the businesses that are impacted.
My name is Mike Ni, I head up products and marketing for Avangate. Today the area we will be investigating is the shift to cloud delivery of software and services. Even as things like online delivery have become frankly the mainstay for broad software delivery, the market perceptions for cloud-based services or SaaS has also changed dramatically and SaaS providers such as ServiceNow, both a pioneer as well as a beneficiary to this rapid market shift, are clearly out in front heading up the way and giving broad experiences that we can learn from.
Just a quick introduction to ServiceNow, ServiceNow is a leading provider of cloud-based services that automate enterprise IT and operations. Their services includes a suite of applications built on a proprietary platform that automates workflow and provides integration between related business processes, and are used by some of the largest companies in the world, including GE, Deutsche Bank, Johnson & Johnson, Home Depot, Coca-Cola, Morgan Stanley, and a long list of others.
We are lucky to have here with us Rhett Glauser, Director of Corporate Communications at ServiceNow, not long from their recent successful IPO, to help us explore this topic. Rhett, if you'd give us a little background to yourself and that would give our listeners a little perspective to actually… your perspective.
Rhett Glauser: Yeah, Mike, thanks for having me. I come from essentially about 12 years of doing corporate communications in the IT management software space and it's a small industry. Some of the guys I worked with at Symantec, Altiris, kind of heard about this little opportunity in San Diego about 5 years ago with an IT service management vendor called ServiceNow that was looking to do Software as a Service. In my experience with other on-premise or traditional vendors I knew that this was a challenge, or an opportunity I should say, for this market, and realized that there was, because they were doing it by essentially building software as a service and cloud services from scratch, that they had a really good shot at being successful and so I left my previous company and signed up with ServiceNow and here we are. So it's been an incredible ride and it's been fun to watch the market play out and [see] some of the dynamics in this industry today.
MNI: You clearly have a unique perspective given your background from leaders like Symantec through to leaders like ServiceNow. That said, glad you could join us, and let's go ahead and jump right into a couple questions that are coming at least to us from the customers that we work with here at Avangate.
So Rhett, with your experience I would love to first touch upon your view of how the broader market has shifted over these last couple of years. In this case, more specifically, how has your buyer shifted over the years, their perceptions, their expectations, on SaaS-based services?
RG: Sure, yeah, so it would probably be good to kind of define who our buyer or our customer [is] in the first place and kind of where they're coming from. We sell to the group of IT organizations of the Global 2000, some of the biggest companies in the world and you know these IT organizations have been using some of the same software for decades in some cases, you know, with varying degrees of success. But our founder, a guy by the name of Fred Luddy, came from one of these legacy software vendors, he was actually the CTO of a large systems management and IT service management vendor. So he saw firsthand some of the pain that was caused by acquisitions that would be happening in this place, within the market, and some of the old technology and you know, the CTO, the company would buy these little pieces of technology and essentially toss them under the fence to him to make heads and tails of it and in many cases these were technologies that didn't play well together and at the end of the day the customer and the developers in the organization were essentially left holding a bag of very incongruous pieces. And so, again, he saw that pain, he realized there was an opportunity to do something about it and so he started ServiceNow.
At the time, this is about 8-9 years ago, companies like Salesforce.com were providing SaaS for CRM or NetSuite, you know, [was] just getting started selling kind of into the ERP space. But there was nothing for IT and so, we address that pain head on with a cloud service that allowed the IT organization, which had kind of been the cobbler's children in many ways, they never got the shiny new toy. So we recognized an opportunity to provide them with that, and so, again, this is 8 years ago and most of the Software as a Service vendors were selling maybe directly to a salesperson or a marketing person with a credit card, not exactly the most discerning technical buyer. And we come in and say we're going to sell directly to enterprise IT, very technical sale, very discerning buyer, and at the time Software as a Service was new and these guys were skeptical, so we had to really kind of cut our teeth on a difficult sale, but again there was just so much pain and so much appetite for just a new way of doing things that we were successful.
So when you ask about how this buyer has kind of shifted over the years for us. Like any startup, initially we would sell to anybody who was interested, right, friends and family. Fred tells this story of driving up and down Pacific Coast Highway looking for anybody that might have a need that his little software startup could assist with, but we very quickly got pulled into these bigger enterprise accounts, again just because there was that pain there that they were looking to address, and so it was an opportunity, there's kind of a vacuum in that space and we filled that void.
MNI: Well, you know, it's amazing the approach you took, for sure. I remember the early days I was at NetSuite, the part of the pro or I guess the benefit was you get to bypass IT, with this SaaS solution. That said, given your audience, who you guys sell to, what benefits did you sell about being cloud- or SaaS-based early on, and do those same benefits sell today? How's that kind of value proposition?
RG: Sure, a lot of the same benefits and value propositions are the same, even if you're selling around IT people, money still talks, ease of use still talks, so you know it's kind of interesting to watch some of these same vendors that were selling around IT trying to sell into IT and trying to kind of make amends for the end-around that was happening earlier. But I guess that's another discussion, but the benefits, again, the reason why we were successful in a lot of the cases early on, essentially two things: one, these customers were using these legacy applications that required the on-premise software, client server, that required a significant upgrade every 1.5 to 2 years or so, depending on how quickly the vendor could get a new product out to market, and that upgrade alone in many cases would cost millions of dollars and just would require a ton of work, a ton of resources, just to do an upgrade and so when that happens it disrupts the status quo. And we found that those IT organizations would take that opportunity to kind of look around and see what else was out there; they're essentially re-implementing software that's already installed through this upgrade-so-called upgrade-why not look at other tools?
So here comes ServiceNow with modern Software as a Service offering and we can essentially eliminate that upgrade pain for one, and so to be able to offer that was a significant advantage, and a lot of times helped us get our foot in the door.
And then, you know, [point] two, the other one is cost. Just the cost of owning these legacy applications was just a burden and so to be able to move to more predictable and often lower cost [applications] with a subscription license and without all the pain and the headache of having to deal with the infrastructure and the upgrade cycles, that was an eye-opener for a lot of organizations that are tired of sinking money into a product that wouldn't necessarily provide the value that they were looking for or they needed.
MNI: Well, that's amazing, you know, if anyone understands the upgrade pain, as well as the cost of maintaining an infrastructure, it's going to be IT, and yet it's funny how early on everyone tried to bypass these guys. That said, if you look at where you guys come from and what type of recommendations for software companies that are making this transition to SaaS, or starting in SaaS, where should they focus, what would you tell them and why?
RG: Yeah, I don't know that my response is going to be all that popular with a lot of vendors out there, but it's just that-I just feel like it's impossible to fake it. I guess I'll kind of explain what I mean here, so obviously we've had a lot of success in our market and just about every one of our competitors now today offers something that they at least call Software as a Service, you know, and the semantics of the definition of the term, that's again a whole other discussion, and in many cases what these guys were doing was taking their on-premise, their legacy software applications and just putting them in a data center somewhere and putting a subscription license on the offering and calling it Software as a Service. But I think they're missing the point in many ways. ServiceNow was built to be consumed over the web, in a browser, and the overall user experience is very different than the same old software hosted in a different place. Like I said, don't fake it.
There's a lot of "cloudwashing" going on so today buyers are a little bit challenged to discern between what I like to call "fake Software as a Service" and the real thing. Again, we sell to big enterprise IT. These guys are demanding, they're discerning, not only do they care that it works, but they also care to know how it works, they're going to kick the tires, they're going to stick their head under the hood to see what's going on behind the scenes and in our cloud infrastructure and once we kind of get into that buying cycle and a sales cycle and we start standing up POCs and really kind of get into the usability and the deep discussion of the difference between what we do and what some of our competitors do, it becomes pretty obvious pretty quickly in what you could call almost a blink test, you know it when you see it.
MNI: You know, it's funny you say that, there was an interesting stat that came out of Montclair Advisors, which was that over 50% of ISVs will fail once before rolling out a successful SaaS strategy, and it actually is something that is a great warning when you talk about faking it, just because I've seen a lot of companies sort of put a foot in the water, think they can use their current team, how hard can it be, and they end up having to pull back and try something different. In fact, I think it was Saugatech, the guys that were there, who said about half of the ISVs are going to create a separate entity or business unit just because they need that focus to be truly a SaaS-based company and break from sort of the mold that they were already in. I mean, any thoughts on that, does that ring true to you as well?
RG: Absolutely, I mean Saugatech is spot on, you look at the early success stories in the Software as a Service industry, and those guys were not a bolt-on to a legacy software vendor. In many cases, [Larry] Ellison was a genius, right, he put some money into companies like Salesforce and NetSuite to spin these things out and let them do their own thing, you know, at the same time [he was] kind of doing his Oracle thing, and so I mean we-just within our own space we've seen vendors, our competitors, fail, start and fail, and they're on their third iteration of trying this, and if I ever get a chance to talk to these guys, and I do occasionally, [I say] guys, you just gotta start from scratch and just do it right from the beginning, if you want to be successful. And even today we see some of our competitors have multiple different offerings, kind of hedging their bets within both the on-premise and the software as a service, come in different flavors of software as a service, just to see what sticks, and that's a significant burden on the R&D resource of that organization, and a distraction in many ways to their customer base.
MNI: It's interesting you say that, there is a pressure that seems to be around accelerating business model change, do you see that out there as well? It's one thing to go SaaS, which is a delivery model, subscriptions is a huge change, freemium, as you move towards more the B to small B or , you know, more trials, being even a different shift for software. I mean, how is this pressure, do you see [it] accelerating, into more cloud services?
RG: It absolutely accelerates. So the advent of just these incredibly powerful, simple consumer cloud services or kind of consumer apps, is setting the bar in many cases, and that's the expectation that our buyers come in with, they want to see something that's as easy to use and as powerful as Google, for example, and even the Software as a Service vendors, we're setting the standard for ourselves pretty high. We've got these rapid development cycles, which turn the legacy industry on its head as we're issuing several major releases of the service every year, and you've got to keep up with that, and the buyers have a new appetite these days, right? Which is good and bad, I mean, I think that's the way it has to be, the days of a 2-year release cycle with a product road map that goes out 5 years-I mean, who can predict what a customer's going to want in 5 years anymore these days, and kind of the more iterative, more agile approach to getting application and features to the market is the way of the future. I mean, there is a lot of pressure there, and the expectations are definitely changing.
MNI: That's a great lead-in to our next set of questions. One area of concern I hear a lot from our software publisher customers is how their relationships with their end customers are changing. When you look at our days back from more traditional software, how much, not even looking at your customers now, how much has this selling approach, how you have to support these guys, and how you retain them, how has this changed as you move to these different models?
RG: And we're a service provider, right, that's what we do, we provide a service. And the reason we've been successful, we make no illusions about this, we've been successful because we have successful customers, a rabid fan base. These guys tell their friends, these guys take us with them to their next gig, and we are very clear at ServiceNow about customer success and what that means to us as a vendor that lives and dies by the subscription license-I've been here at ServiceNow for more than 4 years and the focus on customer success hasn't ever changed. In fact, I kind of think it's almost become more passionate as that standard that I talked about before, as that bar has been raised, and so I love to see our company even make decisions because it's the right thing to do for the customer despite the fact it might be more difficult, it might be a bit more expensive. For example we made significant investments over the past year in our cloud infrastructure and I like to call it cloud luxury because, we're doing things that a lot of other, most other cloud vendors aren't doing, and the reason we're doing this is-we're providing things like advanced high availability and we're doing it because it's right for the customer, not because it's the necessarily the most prudent financial decision. And so you gotta have that view of the world if you're gonna succeed in this space with this model.
MNI: True, in fact, we see, across our customer base, just an interesting extension of the marketing cycle, just because customers are learning so much more online before they even get to you. And selling is on one side almost quicker, because you can actually give them access easier, they can get going, but then selling becomes harder on the back side because [of] the need to get them really on board and to be successful. I know that I've talked to folks around this organization[al element] called the customer success manager, which is something that, as folks make that transition, we've seen more pop up as an organizational element. Can you talk a little bit about you guys and what you guys had to do to make the customer successful, even organizationally?
RG: We have an organization within ServiceNow called Customer Success and it's staffed with people called Customer Success Managers and that's-as we've grown as a company and as we've scaled this thing out, we are investing in the customer experience and that investment in many cases, you know, we've talked a little about the cloud infrastructure, but in many cases we invest in the people and the people that are providing this unmatched service to our customers, so it's giving those, finding those people that have that view of the world where customer success is paramount is critical as we look to grow and be successful as a vendor.
MNI: And I know we touched that even internally, constantly looking at how do we train, how do we keep the customer first and expose everyone in our company to what makes our customer successful? But at the same time, I think interesting enough, let's touch upon the tools as well as the people, there's many more touchpoints with the customer, as we both know. How do you look at supporting the customer, is it more self-service, how do you maintain that relationship and actually still make it-I wouldn't say profitable-but cost-effective?
RG: Yeah, so it's interesting you mention the accessibility, within kind of the sales cycle or as you market your company as a Software as a Service vendor, I think you have to be much more open and you have to be, you have to expose, [it's] just kind of the nature to be open, expose yourself to the customer and the prospect. You can't really hide behind, I don't know, CDs in a box or the requirement for hardware to be installed.
One of the things that we've always done is we provide an open instance of our application stack directly from our corporate homepage. That's always been kind of a hit with our prospects and our customers, the fact that they can go in there and dive in to the tools themselves before ever talking to a sales rep or before ever talking to somebody at ServiceNow they can get a feel for what we're all about. I think in many ways that takes some guts, right, for us to do that, to essentially just open the kimono that way.
But you mentioned kind of automating the customer experience and providing self-service and the interesting thing is in what we provide to our customers, ServiceNow is an automation tool for IT. A big part of that is providing, helping our IT customers provide self-service to their end users and so there's a lot of drinking your own champagne for us in this case but the-I guess my point is there is a built-in expectation and if we want to scale, and we have been scaling, we do need to provide that automation and that self-service to our customers, just like we're helping them provide it to their end users as well. It's critical.
MNI: Awesome, awesome. The one thing that comes up a lot with our customers as well is just going global, and while we don't want to speak about specific clients, can you talk a little about as a SaaS vendor, has it changed going global in terms of- does the challenge as a company change? And what you think about that?
RG: It seems like there's always been opportunity for us in whatever market we look to go into and our growth speaks for itself. Being publicly traded you can go out and see how we've done, but referring back to kind of this complete customer experience, we don't go into a market unless we're ready to provide that great service and support for the customer specifically in that market that they would expect from us. I would say that we're very measured in our global expansion plans and take those decisions very seriously so that we're not compromising that standard that we've set for ourselves.
MNI: That's a great answer. You know, it's-one thing, it's funny because we often get the question since we do help a lot of customers go global when selling and there's always this point of-the barriers to entry are so much lower, we can deliver online, so we can go global. Our response is always it's one thing to be able to sell there, but to be able to completely understand the buying context and how to really support them, make them successful, like you were saying, it's such an important part. Is it partners, is it resellers that can help you, is it that you have to put an entity there, again I think like you said it's more nuance, you have to think that-just because the barrier to deliver are easier, you [also] need the ability to distribute, support, are things that are still mainstays you have to watch out for.
RG: Yeah, you're exactly right, I mean this isn't the days of having a sales rep in Fiji who has a box of CDs that he can sell and just drop off and never see that customer again. We sell into our customer, that 's just the very beginning of a relationship and a great experience that we need to provide and a service that we need to provide and so it's not just-we're not just selling software CDs anymore.
MNI: Certainly the relationship with the customer and the need, and how to deliver on a regular basis, value, changes a lot. But you know, given that we have both been on-premise and on-demand, at these type of companies, how do you think being in a SaaS provider has changed the whole product development cycle, and what role do you think the customer plays in that definition?
RG: It's been interesting. There are frameworks and standards within our industry that's been interesting to watch a lot of our customers kind of-I'm sorry, a lot of our competitors-march toward those frameworks and standards when it comes to a development perspective. They're kind of taking their direction from not necessarily the customer. We've always kind of taken, kind of led with the customer. We can do that. If we get feedback from a customer there's a really good chance that that feedback can be in the next release, which is coming in four months as opposed to maybe in two years when that request maybe isn't as relevant or needed anymore. Just the rapid pace of development and innovation that has been brought on by this new model has kind of changed expectations and changed what's possible as well.
I like to refer to what we call "rolling the credits." We have a user conference, an annual user conference that we do every year, and we've made a habit of at the end of one of the keynotes "rolling the credits." Now what that means is we put a feature or an application up on the screen and then we put the customer's name next to it that asked for it or that was influential in directing our development efforts to provide that new feature, that new application. And that's a very long list. You imagine the end of the movie and you see all the credits start to roll and that's what it looks like. Again, that just speaks to where we take our cues.
MNI: That's a great idea, by the way, I'm going to use that for the next conference.
RG: It's fun for our customers too, they're sitting in the audience and they see their name up there and we'll see their name up there several times and it's just kind of embodies who we are and how we think of our customers.
MNI: You certainly are building a community and if anything you get bragging rights, you know-I've come up with the best ideas, what have you done? You know, it's interesting also, one thing is that a challenge comes up as you deliver SaaS products that you keep evolving, you keep adding value, but the question of what do you package into a different module, what do you charge for as extra? While again not talking maybe specifically about you guys, but any thoughts about how you've seen the difference between, let's say Symantec, as well as where you are now or broadly in SaaS?
RG: The traditional vendors and the perpetual licensing model really kind of got into bad habits in terms of just making their licensing model extremely granular. And in many cases I think our customers felt, the customers of those products would feel like they're being nickel and dimed all the time. They've got this stack of applications that they've licensed and they wanted to do one other thing, right, and to be able to go and do that one other thing they've typically had to venture into another negotiation cycle or go back to the sales rep and see if they can get that turned on or licensed appropriately.
I think that in the SaaS world it's very different. In many cases you're subscribing to a service, right, and the applications provided in that service are essentially bundled together and we've also talked about the rapid release cycle that we experience. We take our most recent release and we came out with three or four new applications in our most recent release and our customer just get those, that's part of the subscription, that's part of the service that they're paying for. They don't have to go back and re-up their license or go back and renegotiate to get access to those new applications and that's a very different, I think more customer-friendly, approach to packaging and pricing that again is I think another reason why Software as a Service and Cloud Services have been so successful.
MNI: Very cool. And you know, interesting, as we talk about sort of a broader solution, I also hear you guys, ServiceNow, being referred to more and more as a platform. Is this a shift, and if so, why this shift?
RG: To a casual observer, I think it might be considered a shift, but to our customers and the folks that know what ServiceNow is, it is not a shift. Let me kind of explain what that means. Our founder Fred [Luddy], essentially from the beginning he created a platform, a very configurable, very flexible platform that essentially automates work and automates process. Fred came from this IT management industry and so he understood the market, he understood the buyer. So it was easy for him to, I guess 8 years ago, even today this platform as a service concept is still very immature and people are struggling all the time to define it every day. On Twitter, just watching people go back and forth and just getting into these debates about what is platform as a service what is infrastructure as a service. Go back 8 years and you say platform as a service, people are like, "What are you talking about, what does that even mean?" So we knew that we had to sell a discrete set of applications and tools to a defined market. And so that's what ServiceNow is and that's where we've made our success.
Now, the interesting thing is we've been selling this Software as a Service for IT management, and IT automation, for 8 years now. But our customers in IT, they get this, they get ServiceNow in and they're successful with it, but then they start to realize the flexibility and the applicability that it has for the rest of the business. And they, all of a sudden they have a line at their door from other organizations within the business, their business units, asking to get some, right? And to get on to that. And to have them replace their Lotus Notes or their SharePoint with this thing that they're calling ServiceNow. Again, our market and our buyer is the IT organization. What our customers are doing with ServiceNow in many ways is very much not Software as a Service and is very much Platform.
And so yeah, that's-I guess depending on who you are you might call it a shift, but we've kind of, it's been the way that we've done things from the beginning and we really kind of leave it up to our customer to define how they use ServiceNow and how they get value out of it and in many cases it is the Platform that they're having more success with it and it's a good thing for our whole industry whereas, it allows our customers to get out into the business and get out beyond kind of just the confines of the datacenter. And so it's good, it's a good development.
MNI: Interestingly, and I'm not sure if you can comment on this, but we see those who are becoming more of a platform, becoming more of a, almost a marketplace, first starting with a directory of other add-ons, and then more of a marketplace of interest to the folks that we typically work with who are looking to sell software. Is this something that you see becoming more prevalent? Or if you can comment on what you guys are doing, please do so.
RG: So there are some things we're working on that I'm not at liberty to provide details on at this point, but you're exactly right. There's an ecosystem today, after our 8-9 years of success in the market there's an ecosystem that's evolved of ServiceNow partners and customers and experts. And these guys are good at using the ServiceNow Platform and being successful with ServiceNow and-I guess let's just leave it at there is an opportunity for us to get more serious about our go-to-market plans with that.
MNI: Perfect. So Rhett it's been really interesting to see how much what you are saying mirrors what we're seeing across our broader customer base. It's certainly a fairly significant shift as we move toward the cloud in both business model as well as how to just think and operationalize the company to even the people you hire. That said, I just want to thank you for your time, your insight, I certainly enjoyed the conversation and thank you again for your time. With that, let me go ahead and end this interview and welcome those who are listening to look at the Avangate site to find other great interviews, whitepapers, webinars, resources, as well as feel free to carry on the conversation at our blog at www.avangate.com. With that, see you on the next interview series.
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