 ServiceNow Knowledge 14 is sponsored by ServiceNow. Here are your hosts, Dave Vellante and Jeff Frick. Welcome everybody, we're back. We're here at ServiceNow Knowledge 14. We're at Moscone South. Mark Toludo is here, he's the CEO and founder of fruition partners, a long time partner of ServiceNow, a big sponsor of this event. Welcome to theCUBE. Thank you. We had you on last year and you know when we sort of got our first Kool-Aid injection of ServiceNow, we bought into it and have been tracking ServiceNow pretty closely since. It's been an amazing year, hasn't it? Oh, phenomenal. So I assume that the ServiceNow ascendancy is just great news for you guys. Yeah, it's great for business indeed. So what's new since we last talked? Ah boy, in the last year, I think we've doubled in size again from overall headcount. We actually now have a practice in South America. We have a development center. We kind of saw the need for having a near short development center. So we built that in Columbia. And I think just the new addressable markets, enterprise service management as ServiceNow, that's a big thing we're going after. What's your headcount now? We are at over 220. Wow, nice. Yeah. And we're in South America? Actually in Columbia, outside of a bar in Kia. Columbia, I've never been to Columbia but I hear it's the best place to go. I have yet to go there. But I hear great things. Yeah, well your nation building, you'll be there soon, I'm sure. Okay, so how's it going down the floor? I see you guys got a big presence. Yeah. Been down there a few times. Yeah, great activity. Got a lot of people coming to the booth. We've had a book signing. We actually had a party at Alcatraz last night. Oh, no kidding. Yeah. Everybody got off? I had most of them. And nobody got stuck behind. Did they do a sweep at the end of the day? They do. There's no cell phone service. So we don't know if they're still there. Good. All right, so we're here to talk about App Factory a little bit. What is App Factory? So App Factory is a fruition service offering. We're actually taking third-party built applications and we're productizing them for the ServiceNow ecosystem. So basically software that potentially has been built, we are essentially not only building it, we're marketing it, we're supporting it, and we're distributing it to the customer base. Okay, and you've got a specific example you wanted to share with us in healthcare, right? What's that all about? We do. So we've been working with a healthcare consulting company that was trying to address the... There's an issue with healthcare in the US. It's a compliance issue, ICD-9, ICD-10. So you have payers and providers, hospitals, that are trying to basically meet new insurance codes. And what was happening is a lot of independent systems were being built on access or notes, and we worked with a consulting company. They were basically the subject matter experts and they worked with us to design the application so it's completely put on top of ServiceNow. So essentially all major healthcare providers, hospital networks, pharmacies can actually use this solution to make sure that they're in compliance with the new government regulation and their trading partners are as well, using ServiceNow to manage the process. So was that done opportunistically because you were in a client and they had an app that was built at some time and you thought this would be a better way to do it? Or is there some other way you're identifying these apps that you want to build? And the second part of the question is then, is it just a service you provide for that customer? Is it something you want to productize? Or is it something that you go out and share with the broader community? Yes. Yes it is. But there's two questions there. What do the ideas come from? Right. And traditionally our ideas had come from customers that we built for that customer. And so when we took on App Factory we said we know there are some software vendors that are looking to upgrade to a cloud based application and there are even consulting companies that have subject matter expertise. They have great ideas for applications but they're not an application development company. So essentially those ideas can come from multiple sources and really the idea is that we're packaging and enabling that. So we saw it at some of our customers. We had a familiarity with this consulting company that we work with. They had already built an application but it wasn't cloud enabled. It was something that they were trying to manage and they were trying to enhance. And they just decided it's better to put this application into the ServiceNow ecosystem. And so a lot of our customers that are already either healthcare providers, even some universities and hospital systems are already interested to actually get it installed. And was it the initial build of one off that that consulting company did or did they actually have a product that just weren't doing it the right way? So they had the methodology and they realized the methodology also needed automation. So they took it upon themselves to build it. To build the software. But it was on client server technology as stated. And I think the nature of the solution we're trying to solve here is that you have 20 to 50 different companies trying to work together to solve this problem. And the problem with their solution was one person at a time could have access to it. So they saw the ServiceNow platform as something anybody with an internet connection, you know your trusted partners could log in and share progress towards this compliance. So AppFactory leverages the ServiceNow platform. Where does AppFactory leave off and ServiceNow pick up? Sure, so consider AppFactory really our efforts to build and productize applications on top of ServiceNow. So we're leveraging ServiceNow as the workflow engine. We may include other technologies, but it is the backbone of the applications we're building. Really what we're providing is process design, architectural guidance, documentation, support, sales, marketing, so we're going to leverage basically all of what fruition does to take these applications to market. Now you've put about, well, more than 20 applications into share, right? Correct. And so talk about how you utilize share and how you monetize or don't monetize the applications. Sure, sure. So share is really designed by ServiceNow to be kind of a peer-to-peer, sharing code, sharing certain maybe solutions you've built, but ideally smaller ones. This is really a complete application that we're taking to market, but like I said, it also includes support, maintenance, upgrades, implementation services, beyond just kind of sharing of the code itself. Okay, so now you guys have been in the IT service management space for a while. Talk about ServiceNow as a component of your business. Help us understand fruition a little bit better. How does the business break down? Is it predominantly ServiceNow? Is it transitioning to ServiceNow? It has been. Yeah, so if we've been in business for 10 years and really the first five years we were a service management consulting company and we would kind of be vendor agnostic, we met ServiceNow five years ago and decided that doing the system integration work was as powerful as doing the process consultancy. So ServiceNow has always been the backbone, I should say, as we entered the system integrator space. It is our focused single platform that we work on. So we really kind of took the bet that when customers want ServiceNow expertise, they want people that have done it, managed it, maintained it for the last five years. So that was an interesting decision that you had to make five years ago, right? You said, okay, we're going all in before the IPO, right? Oh yeah. Oh, yeah. It was a tiny little company. They were there about 50 people at the time. Yeah, this was 2008. How many people were you? Eight. Eight. Eight people. When in 2008, was it? It was second quarter, 2008, a customer actually. Okay, so just before the came out with it. Okay, but just before the financial crisis. Oh yeah, that was actually, it was perfectly timed. So okay, so you decide we're all in with ServiceNow or eight person company, they're, you know, tiny little ServiceNow, nobody's ever heard of them. We're going all in, then the market crashes, right? Right. It just took off? Yeah. Well, the market crash was the best thing for ServiceNow because people wanted a cheaper, I shouldn't say cheaper, but a more affordable, lightweight solution. And because of that. It was a forcing function. It was a forcing function that moved a lot of people to ServiceNow. At the same time, being eight people, and we loved the tool so much and the decision to go to being a system integrator was something we realized. We were being a process consultancy but we always handed off development to somebody else. And so we saw the value in combining the development and the process consultancy. And then as we met ServiceNow, being a software company, they didn't, you know, necessarily at the time want to have a big services capability. So it actually, yeah, just worked out. And so, but that's a different skill set to make that transition, right? You know, it's interesting. Being a cloud based platform, you don't necessarily need the hardcore developer product lifecycle management, integration, people that you might need if you were a mobile development company, if you were developing in C or other technologies, because this is really more about the information and the process and the service than it is about the hardcore development. So it was actually a natural extension for you guys. Okay, and so the skill set that you needed was an understanding of process, understanding of business requirements and some logic flow, obviously. Correct. So you're not a programmer by background? I actually am. Oh, you are, okay. Oh, so that even helped more. It did, yes. Okay, so you had those skills. Now, okay, that's even better. So we could talk to somebody who's got computer science expertise. Yeah, it's been a while. Okay, but still. But you came from that background, but you naturally, no, were you ever a hardcore developer? I mean, that's how I came out of college. My first few years were actually doing development for work. Okay, but Google wasn't hiring you, right? Okay, so, but you knew enough about development to say, okay, I can migrate to this platform and this is an easy way, an easier way for my company to develop apps that are going to support my business. Yes. Okay, so talk a little bit more about how the applications that you develop support your business. I'm interested in the sort of monetization model there. Sure, so basically, although we do service the IT service management market, we've kind of dropped the IT piece off. We talk in terms of service management. We find that the process disciplines that you can take from ITIL or IT service management, they really are broadly applicable to looking at HR case management, field services, purchasing, legal, all of these other departments are essentially doing IT service management processes. They just don't call them that, right? A call center will call their, they won't call them incidents, they'll call them cases, right? If you're in HR or something, it's just a naming convention, but we're all really doing the same kinds of work. So with that kind of hat on, we found that service now, because at its backbone is a service management tool, it was easy to translate these other departments processes onto the service now framework. We've even compared and contrasted building things on Salesforce compared to service now. And because it's a more of a workflow engine versus like a campaign management contact management system, those processes were easier to put on top of service now. How do you compete with the big global whale system integrators, guys that, you know, hundreds of thousands of employees, they're in every country and every city, deep domain expert, expertise by industry. What's your differentiator there? Sure, we try to be very practical. You know, we have, first off, being an early adopter of service now, having now five years experience on the platform, that depth of expertise and being that that is our niche focus. I mean, so on the system integration side, it is the depth of focus and the innovation of what we built on top of service now. But at the same time, our approach to doing the consulting and process side is very pragmatic. We try to at least speak in terms of crawl, walk and run that as customers are trying to adopt not just the technology, they're trying to change themselves as an organization. So we try to make incremental improvements because we realize there's a strong people side of this business and I think that really resonates with our customers. We're not trying to pull up a busload of people for the next three years, we're trying to show incremental value every three to four months. Now you have a service now center of excellence, is that right? We do, and I actually- Talk more about that. Sure, well we actually have two main functions. One is our, we have a research and development function which is kind of our internal COE, how we build, how we architect, how we recommend designing service now applications and then the ability, I mentioned the Columbia and the Baranquilla Development Center. So that's actually how we actually then go execute and manage service now for customers. Okay, so it's a resource for your 220? Or it's a- It is, yes. And you sometimes fly customers in and they kick the tires or is it really more an internal resource? It is predominantly internal but we then apply those resources to kind of the harder, more challenging innovative solutions we're trying to build. So it's a way for you guys to repeat and apply best practice throughout your organization and make yourselves more productive and ultimately pass on the value to clients. Exactly, if we were only doing one project at a time and not learning anything from that project then we really don't gain much value. We have to do a project, learn something, catalog it, understand how we could use it. Maybe it's applicable to other industries. So that's kind of what that function performs for us is learning from our own work. Stuff you'd like to see from service now as a partner, what's on their to-do list? You're talking to the service now here. What do you want to see them do that would help your business? Probably the biggest things that they've been doing, they're already in motion. So things like Share, things like the app community, basically starting to showcase what their partners have built. And I don't mean the independent software vendor partners, they're services partners and we know a lot of them from being in the ecosystem for years. They've actually built like we have this ICD-9 to ICD-10 compliance application, HR case management. We've done things for environmental health and safety but we've had to showcase those, kind of ourselves. I think service now is making strong moves into showcasing what people have actually built on their platform, not just their customers but their services partners. But does the line start to break down between the services partners and the ISV partners as you start to build more applications? Probably the closest, because we only build on top of service now, that's a little bit different. So we're basically building solution using service now as the workflow engine. Rather having our own separate technology that just integrates with service now. But I would imagine there's some pure play ISV partners building their app on service now down on the floor. Good question, maybe. I mean, there's, it is possible. Possible, but you're not putting, but there's none that you're actively installing. Not a ton though. When you walk around the exhibit hall, it's a lot of service providers that are playing ISV, because it's easy to do. Hardcore ISVs are maybe building their own service management app. Yeah, it's a nice way if you got a nice complimentary widget, a lot of customers. And Mark, you're cool sharing your innovations. Obviously you're putting stuff in share with your competitors. You're right. We have to understand what we consider very compelling and what we want to share and how much we share and how much we give away. Of course, we want to be relevant to the community. We want to show that we have domain expertise. We also don't want to give away too much. So we're always kind of finding that balancing act between showing that we know the product and we know the tool, but not educating our competitors. It's kind of like the open source thing. How much engineering resource do you put towards your core versus the open source? How much do you put towards your commercial products versus that, what you're going to share? Right, exactly. When you want to participate in both. Right, because we want to do, we do want to show our relevance. We kind of consider it a marketing tool as well. We are relevant and we build innovative solutions. But you can't give it away. Right, right. Okay, Mark, we got to go. Well, so we'll have to leave it there. Thanks very much for coming back on theCUBE. Congratulations with the progress that you've made with fruition and good luck, we'll be watching. Okay, thank you. Keep it right there, everybody, but right back after this word, this is theCUBE.