Sitting in the Clouds
Welcome back suggests Barada a podcast takes just ten minutes to get you smarter on the collision of tech, business and politics. I'm Dan for MAC on today's show a roller coaster day for big US healthcare plans. And why cities not congress are the ones clipping big tech swings? But I sitting in the clouds, so we spend a lot of time on this podcast talking about big tech companies. But almost all of that revolves around consumer facing big tech companies like Facebook and apple and Amazon and sure each of these giants also sell services to other businesses, but their main goal is to interact with us when we're not at work. But today, we're gonna shift focus a bit and talk about enterprise software. These companies are beginning to have the same type of impact on us at work that the fan companies have honest at home and are following similar sorts of trends, like moving to the cloud and moving to mobile plus revised interfaces that make life easier for both IT folks and the rank and file, plus it's really big business Salesforce, arguably, the world's biggest pure enterprise software company is valued at over one hundred twenty billion. Dollars. Same for adobe both workday in service now have market caps higher than forty billion, and that doesn't even account for the enterprise segments of Microsoft or Amazon. More importantly, the move into the cloud means these companies are somewhat more recession proof than enterprise software companies of the past when new clients would have to put up huge upfront money, and sometimes even install big on premises boxes. So this is software as a service or SAS where contracts can be recurring and integration can be kept relatively simple. If fifteen seconds. We'll go deeper John Donahoe president and CEO of service. Now, the first this. There's more news out there than ever before. But these days it's harder than ever to find it in to know what to trust axios. AM takes effort out of getting smart by synthesizing, the ten stories that will drive the day and telling you, I they matter subscribe at sign up dot axios dot com and now back to the program to podcast. We're joined now by John Donahoe president and CEO of service now John you've been at service now for around two years, and before that, obviously ran EBay talked to me what's the fundamental difference between being the CEO of a consumer tech company and a big enterprise tech company. They're actually more similar than dissimilar. I would say because technology's changing our lives at home and now at work. So the last ten years has been the of the consumer mobile revolution where the mobile devices that are now in our lives Borden. The caught up occasions, I can EBay PayPal completely transformed. Our lives at home and take what's complex interpersonal lives and make it simple and easy and intuitive. But up to date. No one would ever describe technology at work as simple, easy and intuitive technology at work is frustrating. It's complicated. And over the next ten years. I believe if the last decade was a consumer mobile revolution. The next ten years is going to be the revolution of the impact of technology at work, and you feel that's. Mobile as well. Correct. That's what service now does too small examples in your home life. Let's take pay pal. Pay pal has your money, and yet you can safely and securely reset your PayPal password in five seconds on your mobile device anywhere in the world. And yet if you had to reset your Email work, Email password. What would you have to do? Right. You'd have to call someone in IT that makes no sense. And so technology is like service now enable you to have the same simple ability to other. It's reset your password or have an employee on boarding experience. Happened completely on your mobile device. Be simple, easy and intuitive. So the same kind of experiences, you have at home you now can be able to have at work a lot of consumer facing tech companies or companies, we view as consumer facing tech companies have also gotten into the enterprise, so I'm curious how and some of them almost do that as a technique. Right. So dropbox, which again is more consumer facing. But they use that as their example. Right. Somebody starts using dropbox at home for their personal storage issues. And then they bring it to work and eventually gets the IT guy. And then it becomes the corporate solution internally how do you guys view competing with kind of consumer internet companies that employers are basically bringing into the companies from home really look at what's happening in the enterprise are at work every company around the world is embracing cloud packed every company every government every educational institution. Because it's cloud is the once in a generation technology. It allows you to divide a better user experience at a lower cost with more security and compliance, and if you look at who's emerging of the major enterprise platforms. It is Salesforce workday service now adobe, maybe office three sixty five maybe SAP if you have a supply chain along with AWS, Azure, and Google cloud, and those are the core fundamental platforms that our neighboring that future of work and service now within that is the digital workflow platform, which provides both digitizing IT experiences as well as all the cross. Actual experiences such as employee on boarding and the entire end employee experience within that space, and you talk about those kind of those big companies, and some of which are Microsoft having kind of two of them, you expect to see a lot of not necessarily consolidation in terms of companies like yours and Microsoft cetera buying relatively smaller competitors or upstarts, but do you expect to see large scale consolidation big emanate between maybe some of those players you mentioned, Dan, not really I'll just can speak for service. Now, our our aspirations to build a great enduring company where purpose driven company, and we're getting to a size and scale that frankly, not many people in the world could afford to buy a service now, and I think the same things through with the work day and seeing things through with this L force. And so I think what you're going to see is a category of companies that are the next generation winners or the next generation leaders. I should say being major platforms from your perspective is slack one of those cornerstone platform companies going forward or is it a tool both. So we we deeply integrate with slack. Everybody does. So I'm I'm. I'm wondering, do you view them as a company that will be an independent thing going forward? Or do you think someone snaps them up? I can't predict the future flack, but I can't say that. I think it's a great platform. And so we want to do is be able to embrace if a engineer or an employee wants to access their service now experience through slack. Great. If they wanna come straight to service. Now's great mobile app. Great. They want to go to their laptop and access it through their laptop. If they wanna use Alexa. I was in Australia last week principles hospital. And there you see patients, nurses, and doctors, and that's accessing help through Alexa, that was tied to the service now platform, and so I think however, you access it and slacks one of those channels. I think they'll be multiple ways to access getting help and enterprise, and so consumers will have choice, and they'll use different vehicles or different access approaches for different issues, your stock prices gone through the roof this year when I say, I don't mean the last twelve months just, but I mean, literally since January first you guys also aren't. Business. And you're you're hardly alone in that and the enterprise software, even consumer software space there had been for years an idea that particularly mature companies which services now should show prophets. You guys don't traders don't seem to mind can you speak to how you view profitability in tech right now. Would you really have to look at is what care about and I think what we're focused on is one. Are we fully capitalizing on the opportunity? And so our growth rate is know, you know, we grew revenue thirty nine percent last year at reasonably significant scale, and we gave guidance have greater than thirty percent growth this year. So first and foremost are we capitalizing on the opportunity is digital transformation in front of us through growth. We also are profitable in the sense. What investors look at our cash flow. We're very profitable company and the cash flow that we generate and we talk about our cash flow margin of being between twenty and thirty percent news see that and are operating margins strong to of twenty percent. So what you're talking about as profitability which simply is incorporating employee stock. Expense and perversely one of the things that are rising stock price. Does is it makes the employee stock price expense, look larger and gap counting. But we are profitable entity. And we generate very healthy cash. And that's one of the things that investors like which is good revenue growth and good growth on the top line as well as attractive cashflow John final question for you. The last time I saw you physically in person was years ago. You still lots of EBay, and it was you on stage at a conference in Aspen, Brian chess ski who you had help mentor the Airbnb CEO if Brian asked you today John should Chevy bringing my company public in two thousand nineteen your answer is. Brian. It's your choice. That's not a good answer. John. I'm coming to you for help and advice. I know it's my choice fair. I think I think in the same thing I say, by the way, I think Stewart Butterfield's a fantastic entrepreneurs. Well, by the way, the sexy. Oh, yeah. I learned as much from Brian as as maybe I mentored Brian, and I learned a lot from Stewart in the same way about design, but I think each of these outstanding entrepreneurs has to figure out what's the right time to go public. They all we'll go public some point. And when are they ready because it does change the life of a company once you're a public company, and there's some very positive benefits to that in that you get some capital and the pressure the external pressure to to produce often help someone in their execution capability because everyone in the company realizes, there's a transparent scorecard. But you gotta find the right time. And I, you know, I'm not close enough to exactly where being be is. But today, they're ready. But I I know Brian's a great leader it'll make that as a wise choice. John Donahoe presidency of service now. Thanks so much for joining us. Thank you in my final two right after. This axios gives you the news and analysis you need to get smarter faster on the most important topics and are unique smart, brevity format. We cover topics from politics to science and media to tech subscribe to get smarter faster at sign up dot axios dot com and now back to the program a podcast. Now with them from my final two, and I up his megamerger announced this morning between seventeen and well care both US healthcare plan operators that rely heavily on federal government sponsored plans for seventeen a lot of that focuses on the Affordable Care Act or Bama care marketplaces and for well care. It's more about Medicaid, but both could be under threat by yesterday's news. That the Trump administration is asking the courts to throw out all of the Affordable Care Act. Not just the pre existing conditions part. Previously objected to if successful that would threaten not only send teams ACA business, of course. But also well care because the lawsuit would effectively kill Medicaid expansion. So Trump's move is illegal long shot. But it does mean that the ultimate success. Or failure of today's biggest emanate announcement will be determined more in the courtroom than in the board room. And finally, we've heard a lot lately from federal politicians about breaking up big tech companies, but access is David McCabe, rightly points out this morning that much more common and more effective. Pushback is coming inside of cities things like the opposition to Amazon H Q two and New York or similar opposition to a Google startup incubator in Berlin, Germany, the bottom line here is that big tech has built up an army of lobbyists to advocate for them in Washington DC. But only now realizes they need more of a grassroots style. Local activists capability in other words, they got caught flat-footed and we're done big. Thanks for listening to my producer Tim show. Vers have a great national Joe day. Yeah. And that counts any variant like Joey or Joanna, and we'll be back tomorrow with another pro rata podcast.