WEBVTT - ServiceNow Chairman & CEO Bill McDermott Talks Earnings, AI

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Well, I'm thrilled to

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<v Speaker 1>welcome Bill McDermott, Chairman CEO of Service Now. Hot of

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<v Speaker 1>the heels of your earnings, which, let's just say it,

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<v Speaker 1>beat expectations across the board. You're raising your forecast. We've

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<v Speaker 1>got analysts raising price targets left, right and center, and

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<v Speaker 1>in particular they seem to love the current remaining performance obligations.

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<v Speaker 1>Why is there such resilience? What's driving this?

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<v Speaker 2>Bill? It's all about AI.

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<v Speaker 3>And thank you first of all for acknowledging the performance.

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<v Speaker 3>I know all the teammates of Service Now will be

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<v Speaker 3>honored by very nice remarks. AI has become the new UI,

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<v Speaker 3>and we have that platform that is the leading enterprise

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<v Speaker 3>platform in the world, which provides a single pane of

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<v Speaker 3>glass that connects any agent, any model, any cloud, and

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<v Speaker 3>any data source.

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<v Speaker 2>To the platform.

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<v Speaker 3>So the companies that we serve can run a lot better.

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<v Speaker 2>And it's an AI world and we're here to win.

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<v Speaker 1>It told us about the kind of customers. Are they

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<v Speaker 1>global in nature? What kind of industry groups are particularly

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<v Speaker 1>looking for your help?

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<v Speaker 2>Right now?

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<v Speaker 3>Yeah, these are the most significant brands in the world.

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<v Speaker 3>Brands like Nvidia who is live on our AI platform, Starbucks,

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<v Speaker 3>Exxon Mobile Standard chartered into it, the state of California,

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<v Speaker 3>Banco do Nordeste do Brasil, very interesting one, al Raji Group,

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<v Speaker 3>Burla Group, Tokyo Gas, a mercant company.

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<v Speaker 2>So it's truly a global situation.

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<v Speaker 3>And what's really happened and I've tried to be very

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<v Speaker 3>clear on this. We don't live in a cloud SaaS neighborhood.

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<v Speaker 3>We actually invented our own space in this market. That

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<v Speaker 3>highly differentiates Service Now because AI work is cross functional,

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<v Speaker 3>it goes across functions, and today everyone's selling agents for departments.

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<v Speaker 2>But the problem is eighty.

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<v Speaker 3>Five percent of the digital transformation projects out there don't

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<v Speaker 3>deliver a positive ROI today because of integration problems. So

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<v Speaker 3>if you just throw agents in a department, you're going

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<v Speaker 3>to have a bigger mess. And that's why service Now

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<v Speaker 3>takes all your investments, integrates it into one beautiful platform

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<v Speaker 3>and gives you an experience for your people, your customers,

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<v Speaker 3>and your network that drives performance.

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<v Speaker 2>And that's what it's all about.

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<v Speaker 1>But Bill, who are you kicking out? Who are you replacing?

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<v Speaker 1>And is it existential to those that you are replacing.

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<v Speaker 3>Yeah, it's a really important question because Agenic AI is

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<v Speaker 3>an extinction level event for traditional CRM systems of record,

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<v Speaker 3>and the reason for that is ninety percent of the

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<v Speaker 3>market we'll move to a system of action with a

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<v Speaker 3>front end or autonomous engine by twenty twenty nine, and

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<v Speaker 3>we are that provide We handle the order management process

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<v Speaker 3>with a world class configure, price and quote, all powered

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<v Speaker 3>by AI.

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<v Speaker 2>We fulfill and we service the.

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<v Speaker 3>Customer all on one AI platform, and that's the only

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<v Speaker 3>one in the world like it, and that's what the

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<v Speaker 3>world wants.

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<v Speaker 1>To meet that demand, you need the infrastructure. We understand

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<v Speaker 1>that you've just secured a new cloud deal about four

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<v Speaker 1>billion dollars. Can you tell us who you've gone with?

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<v Speaker 1>We understand maybe it's a Google Cloud deal.

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<v Speaker 2>Yeah.

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<v Speaker 3>We have great relationships with all of the hyperscalers and

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<v Speaker 3>they're all fantastic companies and they're all going to do

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<v Speaker 3>amazingly well, and our customers rely on them, and some

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<v Speaker 3>do better in certain geographies than others. Some have certain

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<v Speaker 3>services perhaps that are stronger than others, but they're all

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<v Speaker 3>some of the greatest companies ever, and so we integrate

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<v Speaker 3>with all of them and we'll move workloads for our

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<v Speaker 3>customers to all of them, and the customer if they

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<v Speaker 3>want to run service now in those cloud formations, they

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<v Speaker 3>may do so.

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<v Speaker 2>If they want us to connect to.

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<v Speaker 3>Their data sources, of course we do that, or any

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<v Speaker 3>other data source and any other cloud. And so we're

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<v Speaker 3>the open architecture that makes it all come together and work,

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<v Speaker 3>and Caroline, that's exactly what the world needs.

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<v Speaker 1>Okay, I'm interested in what the world needs. Also is

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<v Speaker 1>sort of clarity on reskilling, because I'm just looking at

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<v Speaker 1>what you're projecting one hundred million dollars in projecting cost

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<v Speaker 1>savings for this year alone. Is that about replacing people

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<v Speaker 1>with the AI the productivity. If you're hiring less, what

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<v Speaker 1>does that mean when you start to scale that out

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<v Speaker 1>across the world.

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<v Speaker 3>Well, what we're doing is we're slowing down the hiring

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<v Speaker 3>in jobs that are quite frankly soul crushing jobs.

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<v Speaker 2>I mean, just think about like it support.

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<v Speaker 3>You know, ninety seven percent of standard software automatically generated

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<v Speaker 3>by AI now, and the pressure on supporting function and

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<v Speaker 3>people has been cut in half. Customer support, eighty percent

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<v Speaker 3>of the customer inquiries in cases now are fully managed

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<v Speaker 3>by agentic AI. And think about security and risk management

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<v Speaker 3>in real time. All the patch work and the change

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<v Speaker 3>management is done by agents now. And the same is

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<v Speaker 3>true go to market. You know, think about people that

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<v Speaker 3>talk to customers. There's no prep work anymore. Their AI

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<v Speaker 3>teammate is doing that for them at service now, So

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<v Speaker 3>the speed of the company has accelerated dramatically. The supporting

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<v Speaker 3>cast of the soul crushing work is now being done

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<v Speaker 3>by agents. They work hard twenty four by seven. You

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<v Speaker 3>don't have to pay them, and they don't need any lunch,

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<v Speaker 3>and they don't have any healthcare benefits, so they're very

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<v Speaker 3>affordable and that really complements our workforce. So we're still hiring,

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<v Speaker 3>but we're hiring less in those supporting functions. And I

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<v Speaker 3>suppose that's going to happen to all well run companies.

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<v Speaker 3>And I say that because we now need to think

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<v Speaker 3>about how you've run a corporation on service Now, how

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<v Speaker 3>you change the w where you run your business processes.

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<v Speaker 2>It could be ordered a cash, procure to pay.

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<v Speaker 3>Hire to retire, designed to product. These are all processes

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<v Speaker 3>that go across functions and we need to have those

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<v Speaker 3>twentieth century ORG charts obliterated.

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<v Speaker 2>We now need to work in teams.

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<v Speaker 3>Teams need to work across processes, and the agents need

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<v Speaker 3>to be the best friend to humans. And if we

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<v Speaker 3>do this right, the GDP of the world will go up.

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<v Speaker 3>Companies will outperform not just on the op X, cost

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<v Speaker 3>takeout and productivity, but they will be building new horizons,

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<v Speaker 3>new business models, and new dreams on the service now platform.

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<v Speaker 3>And we're excited.

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<v Speaker 1>Someone else is excited right now about AI, and it's

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<v Speaker 1>the administration. We've got the new AI Action pan.

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<v Speaker 2>What did you make of it?

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<v Speaker 1>What do you think about perhaps the light to touch

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<v Speaker 1>in terms of regulation.

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<v Speaker 3>I think it's outstanding. We need less regulation and more innovation.

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<v Speaker 3>And I think the President and the administration are doing

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<v Speaker 3>a very good job on AI. They dedicated a whole

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<v Speaker 3>symposium to it yesterday and I fully support it. You know,

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<v Speaker 3>government has to run more efficiently, more transparently, with greater accountability,

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<v Speaker 3>and that's what the service now platform has been doing

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<v Speaker 3>in the public sector, especially in the US for many

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<v Speaker 3>years now. And now that we'll bring an AI to

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<v Speaker 3>the forefront, we're just going to accelerate the pace in

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<v Speaker 3>getting behind the President's agenda and do even better work.

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<v Speaker 3>And I think this is going to happen in governments

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<v Speaker 3>around the world. You know, I travel to countries all

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<v Speaker 3>the time, and when I meet them, they all want

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<v Speaker 3>to understand what the US government is doing. They're very

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<v Speaker 3>interested in this AI movement, the efficiency movement, the effectiveness

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<v Speaker 3>of technology. So I think it's a pace setting move

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<v Speaker 3>and I'm fully behind it.

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<v Speaker 1>Within that, of course, you mentioned how you're winning contracts

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<v Speaker 1>with the government of the State of California. How has

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<v Speaker 1>federal spending been within service now? How you looking at

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<v Speaker 1>that as an opportunity to scale because many had worried

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<v Speaker 1>that they were shutting down perhaps some of the services

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<v Speaker 1>to you.

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<v Speaker 3>And yeah, of course, I mean if a department shuts down,

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<v Speaker 3>obviously that's not great. But at the same time, we

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<v Speaker 3>got six net new logos within the government in the

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<v Speaker 3>current quarter. And you also have state and local governments too,

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<v Speaker 3>So yes, we're winning in federal but we also have

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<v Speaker 3>like the North Carolina Department of Transportation for example, the

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<v Speaker 3>State of California. They're doing many, many things with this

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<v Speaker 3>AI platform for business transformation because they have to give

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<v Speaker 3>the citizens better service, they have to lower their cost base,

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<v Speaker 3>they have to do a lot more with less head count,

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<v Speaker 3>and Frankly, the unreported truth of the matter is there's

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<v Speaker 3>millions of technically related jobs in the global economy that

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<v Speaker 3>are unfilled today, and AI needs to fill those jobs. Similarly,

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<v Speaker 3>we need to train, certify, and get the workforce ready

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<v Speaker 3>for this AI revolution because it will not stop, it

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<v Speaker 3>will intensify greatly, and we can't leave people behind. So

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<v Speaker 3>we've developed service Now University where we're training three million

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<v Speaker 3>people this year. We have rise Up where we rise

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<v Speaker 3>up with governments and communities around the world, especially those

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<v Speaker 3>that don't have access to some.

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<v Speaker 2>Of these services.

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<v Speaker 3>And we're not even charging for this because we have

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<v Speaker 3>a big heart, a big culture, and we want to

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<v Speaker 3>be the defining enterprise software company the twenty first century,

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<v Speaker 3>and this is how we intend to do it. We

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<v Speaker 3>will continue the pace of innovation, we will win an

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<v Speaker 3>AI and our company will set the standard for all

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<v Speaker 3>other enterprise participants bill.

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<v Speaker 1>With tackling talent. But is there any other bottleneck or

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<v Speaker 1>anything else that perhaps limits the growth in the business

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<v Speaker 1>that clearly is pretty stellar right now? Is it macro environment?

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<v Speaker 1>Is it certainty? Is it interest rates?

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<v Speaker 3>Imagination is the limit? So we have to have dream

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<v Speaker 3>big people. And similarly, we need everybody in the workforce

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<v Speaker 3>fully engaged, not just in our company, but in every company.

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<v Speaker 3>You can't leave people behind because right now, if I

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<v Speaker 3>look at the biggest challenge with AI, AI is magic.

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<v Speaker 3>It's fantastic, but a small percentage of the workforce today

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<v Speaker 3>understands it, knows how to use it, and as being

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<v Speaker 3>encouraged to prosper with it. And so a lot of

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<v Speaker 3>times the headlines read AI as a negative and as

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<v Speaker 3>a concern, And I look at AI as the best

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<v Speaker 3>friend to humans and the best teammate a human ever had,

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<v Speaker 3>because it'll give you access to knowledge and information that

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<v Speaker 3>you would have never had without AI, and so having

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<v Speaker 3>that can make everybody better. And we have to lift

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<v Speaker 3>these companies up, and we have to have every department

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<v Speaker 3>in these companies work together, collaborate together with AI, work

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<v Speaker 3>with AI to transform. So the human element is the

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<v Speaker 3>biggest limitation all the other things, alike the weather. You know,

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<v Speaker 3>some days the weather's great, some days it's not so sunny,

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<v Speaker 3>And you've got to operate in all environments.

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<v Speaker 2>And we're ready for that. Old Weather Company