 Live from Las Vegas, Nevada. It's theCUBE, covering Knowledge 15. Brought to you by ServiceNow. Hey, welcome back everyone. We are here live for day two of wall to wall coverage. Getting down to the end of the day here live for theCUBE. At ServiceNow, Knowledge 15, hashtag no15. Join the conversation on crowdchat.net slash no15. This is theCUBE, our flagship, we're going out to the events and I'm John Furrier, my co-host Dave Vellante. Our next guest is Steve Bates, principal CIO advisory at KPMG. He runs the global technology business management practice. Welcome to theCUBE. Thanks for having me, good to be here. We could probably talk for an hour on just a couple of different awesome use cases, but the digital transformation is a buzzword being promoted by all the top analysts. It certainly chums the water in the mind of sea level suites, are we Apple, are we Apple? I want to be like Facebook, I want to be like Google, I want to be like that. I want to be, I got to be digital everywhere. All formats, all channels, gets them all hot and bothered. End of the day, rubber hits the road, you guys are in this business with technology, business management, TBM. Yep. What is that? What is this going on? Explain the dynamic between those two, well one's a buzzword, one's kind of a practice. What's going on with this trend? So let's take a step back and look at the method of how we run IT, right? The paradigm of traditionally running IT as a utility, that quiet, silent, automated environment where you're trying just to push down cost to the lowest possible level, right? Digital transformation is kind of blows that out of the water, right? It's no longer about an access to a single set of services that you have to go through a function to get, right? Technology has been largely democratized and is accessible to everyone. So how do you allow that to be, how do you get transparency into what's important, right? How do I invest in the right things if I can just go buy services with my credit card? How does the CIO get their hands around with the right things? Digital accelerates that so much more, right? No longer are we bound to a data center. No longer are we bound to just a set of applications. You need a way to manage your business of IT. That's what TBM is trying to do. It's establishing the tools and processes and credibility to allow you to do that. So for all those cloud buffs out there, we've been calling that shadow IT. That's the term being kicked around. Playing in the shadows, going behind bosses back, putting some stuff up on Amazon, getting your hands slapped, then saying, wait a minute, we should do that across the whole company. Yeah, is that kind of what's happening? Yeah, and shadow IT isn't necessarily a bad thing, right? It's R&D, right? That's exactly. Okay, you're in a penalty buck. Look, get back out here and implement this for the company-wide. Right, so when you use TBM as the method to manage your business, it's to be able to say, I want transparency into what we're using, regardless if it's- Pardon it, put some practices in place. So take us through some examples off the top of your head where you've seen this in action. What's the platform architectures look like? What are the use cases? I mean, it's hard to rip and replace anywhere. So how do you guys look at that? And what is an example? Yeah, so you got to start with the fundamentals, which is removing the black box around IT, right? This is about getting transparency into who's using what in the estate, right? So an example, most of our clients start with is the use case of, I have no idea how much we spend on IT. It's shocking, I know, we all are surprised about that. Even 70% is for operations, what's the number? Exactly, so that beginning use case usually doesn't come from just the CIO. That really is typically coming to CFO, right? And so our engagement is often with a CFO or someone in the finance organization saying I need transparency to understanding what we're consuming, who's using it, and are we actually spending money on the right thing? So they know what they're spending at the top line or not necessarily because of shadow IT? Correct, so TCO is the entire concept of total cost of ownership, no IT. Oh, forget it, but they know what the IT department is spending. They know what's budgeted, right? Okay, it's a capital budget, and then there's this other stuff that goes on that they don't have a handle on. And so when you see that always increasing cost of IT year over year and over year, you tie that to, well why is it going up? No one wants to, but that's the old paradigm, right? What you want to say when you can use something with digital disruption is we want more technology, right? We want to actually turn that into our differentiator. So how do we use more technology while driving down the cost on things we don't care about? How do we do it? So that's the original use case is always around transparency. It's what you do with that transparency, the actions you take, that's interesting. That's what's next. And that's where you're talking around. So if I wanted to reintroduce an entire way of doing our virtualization structure, well I know now how much we spend on it, I know who's using it, I know what applications and services it's linked to, and I now can make a decision, a smart decision prior to investing in this, what the value is. And that's what we're doing. Yeah, well it's the second, third, fourth, and fifth thing that you just said. Yes. Those are the really hard things. Absolutely. I mean it's relatively easy to find out at least what's being spent, and that's hard, but what applications are supported, what business processes are supported, what value is it bringing to my organization? Well that's where you guys come in. That's the whole point. This is about the value play and making decisions and on what you're going to invest at linking it to value as opposed to cost. Cost is a component of value, but it's not the interesting part. You're only as good as the data you can get, so talk about the data impact, because running IT as a business, you need the data, so that's where you guys can explain that dynamic. How do you get the data? How does the data get into the system? That's something that I'm a little fuzzy on. Well let's start with the premise that this entire thing running IT as a business is built on credibility, right, and IT typically has very little credibility because they don't have good data, or the data that they do have, they can't defend, right? So how we start with it is with a fact-based conversation, right? So we do a bottoms up model that we'll typically pull from, and in the service now case, we're pulling from a CMDB, a hardware asset management, software asset management, we'll pull in contracts, we'll pull in to help desk tickets, any information that helps inform us on what the IT estate really looks like and who's using those resources. The data is in service now, the data is resident, so it's a trusted source, right? For organizations who do not have a trusted source, like for those that don't have a configuration management system, those that aren't using a service now, it's incredibly difficult. It's disparate universe of data that's all garbage and enriched and manual. What we do is we come in and we standardize that, and we create trusted sources that can be certified and defendable, and that's where you start. Yeah, because I see why you guys are needed because even if you have a CMDB, even if you have service now, you might know what all your hardware is, but you don't know what apps are necessarily running on that hardware, you don't know what business processes they support, you don't know what your dependencies are, you don't know what the users are, you don't know the value of those users. I mean, that's a complicated situation. And so how do you resolve that? We enter with what we have in our service hierarchy, right? So you typically find an IT hierarchy that rolls up infrastructure to some level of IT towers that allow us to see, well, here's kind of what the operating the OS layer is. Here's maybe some middleware, but organizations usually stop at that layer. Our model comes in and we build the whole stack. We start with for the bottom up and the top down at the same time. So we go from business capabilities down to business services, from business services to IT services and IT services and to capabilities all the way down the stack. That for us is an architectural blueprint that then you start running your organization off of. It's service oriented. And then you can look at what? You look at the application portfolio in sort of chunks or suites and then you've got granular. Yeah, there's so many different slices you can take. So let's just say you're an application portfolio manager in your common, pretty common role, but you want to know, let's say one of your use cases will allow you to rationalize my applications, very common, right? So how do I do that? Well, I can look at, if I find one lens, if I want to look at licensing, okay, that's fine. I can look at duplicate licenses out there. But what do I want to see if I, what's the ideal infrastructure to ride this upon? I don't want to get the whole stack from the standardized my platform on the infrastructure through the application. Applications portfolio managers should know that. They shouldn't just be the apps layer. They should manage the whole stack. What if I want to know, though, the applications that are tied to a service, a business service? I can't get transparency of that. There's no, there's no technology today that just simply rolls that off the shelf. No, you can't just do an automated audit, right? Exactly, that's what we're doing, right? Is we're building that layer, that intelligence layer on platforms like ServiceNow that allows you to get transparency from a business service, which is a language you and I would use as consumers down to a technology service, which IT and infrastructure and applications people do. Okay, so now everything we've talked about is challenging, especially in organizations that don't have a clue, which is the vast majority of organizations don't have this data built and mapped out. The hardest part still yet is, to me, if I'm going to make a decision to sunset applications and retire applications and rationalize my portfolio, I want to make it a value-based decision. So how do you deal with that? Is it you have a scoring methodology or some kind of balanced scorecard or is it other KPMG secret sauce? Tons of KPMG secret sauce. No, I would say that it's built on three things. We try to always tie back to existing business metrics. So don't create new IT metrics to prove value. Value's already been declared by the business, by the metrics they run the business by, right? So whatever, simple stuff, revenue, profit, customer experience, share, market. However you want to tie that, we look at time when we're building a portfolio of services, we're looking to tie those investments, those technology investments, directly to those metrics. So you understand that if this portfolio of applications is critical, let's say it's your CRM system, if it is critical to delivering this revenue, we are going to prioritize that as business critical. And you're codifying that tribal knowledge, you're codifying it based upon the people who know the business and then you've got a process to say, okay, now let's put that into the system. Correct, we come in with a framework that we think's 80% correct, and that 20% of enrichment that the business done, and we think that accelerates the process of getting to the value statement as opposed to, well, what is all the linkages between my applications and business? This is a great business because that's an organic thing. It's always changing. You're always in there. So you got to be, well, so okay, so what happens when it changes? How do I manage that? So you're talking full life cycle processes. That's why the TBM is a framework under which you manage your business. It's less about a service and it's more about almost an operating model. You've got to go deep and you've got to partner. You're in the books, you're full forensic. It's a full data position. But if I must see I say, okay, Steve, I want you to teach me how to fish. I don't want you to fish for me. You're not going to say no. No, that's exactly what we do. You're transferring knowledge, transfer. So there's extremely low value for us to continue to come back and do this as a project. This isn't a project to us. It's not an outsourcing project. Correct. You guys just say, here's you've been transformed go in your way and have a good business. So I got to ask you. Good time to go, Grasshopper. So I got to ask you. So when do you get the call? Man, my rooms are on fire. Finally, the second room is burning. Like all, I mean, I wouldn't be proactive. We're really good right now. I want you to come in and do an audit. I mean, is there a catalyst? Give me an example of the pattern. You don't have to name names or just give us the consistent theme you're seeing. When the house is on fire, breach, something's going on, shadow IT. What are the new use cases? Well, we often get called when there's someone standing outside a pile of rubble that used to be their home that is smoldering. Unfortunately, we'd like to get past that. Listen, I just started a new job. My old place is burning to the ground. No, I honestly, I think that it comes back to the drivers are an organization is either getting challenged on the value of the IT dollar. And it is a reactive stance. The CIO is being beat up repeatedly. And their credibility is gone. The CFO. Typically the CFO or the actual consumers. So you'll find that an enterprise CIO is getting hammered by the business unit CIO soon to which he is selling common backbone services as an example. When the equation comes down to cost, that is always the first point. The best organizations got past cost a while ago, right? That's the kind of drain that swamp and there's not a lot you can do. There's not a lot of levers. You start talking about value and that's where organizations always go. It's like corporate kangaroo court. Yes. You get warring factions. CIO saying, no, no, we're doing our best we're peddling as we can. It's their fault. They didn't give us the requirements. CFOs in the middle trying to blow whistles. You guys get called in. Everyone kind of goes to their corner. And you figure it out. And let's have a fact based conversation, not an emotional conversation. Yeah, but then, you know, this facts are there but get it sorted out, get the data, get the facts. That's the hard part. It's getting actually coming in with a method that establishes a fact pattern, a base, that a model that we can agree on and use a common language. You'd be shocked how hard that is for so many organizations because their data is so big. Well, the pressure point really is market. I mean, revenue's dropping, the client door they're not modernized. This is now the payback for bad investment decisions or, you know, hey, we should have done that. Instead of consolidating servers, we should have done that and done this. We have a client, you know, just we were discussing this today at one of our breakout sessions and we have a client who under-invested for about 10 years in area infrastructure. They're paying for those sins now and the problem is they don't know how to take the two to 300 million dollars and refresh money. They don't even know where to apply it and they don't know that they don't want to just rip and replace. They don't want to do like for like, right? They want to take digital disruption as an example. I want to say this, this is an opportunity for us to remake our landscape. We see great examples. The guest on it from the beer company on here is a fantastic example where 19 years in the business, craft beer is growing and the winds were perfect. They pivoted up with ServiceNow and what happened was they got the retail operation, they got bistros, they have distribution, manufacturing so they have not just one business, they have three. So they've now grown significantly. Stone brewery, so. I mean use that as an example of the new ITFM application in ServiceNow, and we're super excited about that, about ServiceNow entering into the TBM supplier ecosystem in this space. It's a big move because ServiceNow is really the only platform that has all of the data that you want, resident to it, right? As a platform, you can just feed it and by putting this analytics layer around this IT financial management portion of it, it accelerates you very quickly past transparency and gets you into the interesting conversations of, well, what would happen if I got into a new line of business? Let me model that, what would happen if I shut down this, move to this? It gives you analytics. It takes IT, it puts IT from a basement organization to full on, in control, the master of the universe, because you've got internet of things there and mobile. You cut every connected device, aka person and system. So now they can do a lot with that. I mean, really great position. Full position in the market. Absolutely. So I got to ask you, Steve, the CIO tag cloud of the stuff he or she has to worry about, mobile, cloud, social, security, service management, et cetera, is pretty complicated matter. So why should they be focused on technology business management and are they focused enough on technology business management? Is it part of their priority list? So I think it has to be. Most of the organizations that are mid-sized to large-scale enterprises, this is simply the way they have to shift to be able to meet this. They don't, think of it this way, that for every other function in an organization, there's a management system. For the finance group, there's an ERP system. For the marketing and group, there's a sales system. There's no such system for IT. There's no management framework for IT. We have lots of principles. We have frameworks like ITIL and COSO and COVID and on and on and on. But there's really no management principles there. TBM is kind of an international standard that thousands of companies are adopting that allow especially large-scale complex enterprises to make smart actionable decisions by running IT transparently. Why big organizations versus small organizations adopt this is exactly what the point you made is we have all of these competing priorities, GRC and compliance and I mean, you go on and on and on. What are you going to spend your time on? How do you prioritize? What is the language of business? Language of business is finance. So we teach CIOs how to speak the language of business. It sounds a little bit rudimentary, but it's truly not when you have- Speak wallet. Correctly, speak, follow the dollars. That's what we're doing through TBM. That's why so many companies have adopted this principle as the right way to run IT as a business. But the tech enablement layer underneath it, still very nascent, it's just growing. ServiceNow's entry into it is just this year. So it's going to be, it's what's next in our mind. So I got to ask the final question. Your outlook for ServiceNow buying opportunity. Of course, stock predictions. Bye, bye, bye. Stock took a real hammering on Friday and we kind of busted Frank's chops a little bit about that but he addressed it. We wanted to get that out there. But it's a platform that is really well architected for this agile cloud, native cloud, born in the cloud, whatever you want to buzz, where you want to call it and be enterprise grace. It's interesting how they backed in from enterprise to now agile. So, I mean, this is really a unique historic use case for vendors, right? I mean, usually, oh, I'm the big startup but I'm going to go to the enterprise or you can go consumer, then you go enterprise. So interesting here, they're in the enterprise but now with consumerization of IT kind of happening. Interesting model. Do you see anything else like this out there? I think it's unprecedented, frankly. I think it's a new model that ServiceNow is setting the standard for. The platform, the design principle that ServiceNow has had of being a platform first and being able to be elastic and extend into non-traditional use cases, I think is at the core of why there's so much value. It's a very easily accessible system and it allows you to take the importance of dead-it quality, workflow, analytics and link them in a way that is just simple. I think Frank Slutman built a new boat that is faster and more agile than the big aircraft carriers that are enterprise. Software companies, I mean monolithic, big up-front licenses, I mean. Yeah, why wouldn't you as a consumer, why wouldn't you want an agile platform that I could start as a rowboat and build an aircraft carrier and then take it back to a rowboat again? Why wouldn't I want to have that flexibility? It's basically like Uber. Okay, trade rowboat for an expo. Business rowboat, oh, let's go. By the way, battleship modern, nukes, they have machine guns. I mean, so this is the model. Buy as you go, create time to value in the budget. So this is disruptive and innovative, like Amazon. But different, but the enterprise is great. But it allows you, I think it follows the speed of business. It follows the nature of the contractions and expansions of it, that's the model I think going for. If you're not enterprise grade, you're going to be niched and struggle to keep up with the change of business. And again, a platform like a ServiceNow allows you to scale and contract and expand into areas where you are comfortable right now. It aligns with your strategy. So it's purpose-built for the enterprise. It's not purpose-built for a function. I think particularly, I think that's powerful. Final question, because we talked about digital transformation, so I'll throw another word, buzzword out there, social business. IBM used to call the web e-business. No one uses that term anymore, e-business. That's the web, that's the internet. But they're also talking about social, which is now transcended to be more, okay, social media, all this stuff, buzz, more PR, PR function, maybe some buzz. But now you're seeing the touch points be more business-driven, workflow-driven. So Frank mentions email sucks. My kids kind of figured that out already on their own. So they don't use email very much. So phone access is consumer. So social business, real, not real. Similar to the way IBM used to call e-business early on. And what's your outlook for this categorical new direction? Again, I think it's just the next logical step from the evolution. Like all things, the speed of these changes are just compounding. But go again, back to your digital disruption. Your mobile platform is just now, that piece of glass is now your foundation for everything. And that's just simply a fact. The paradigm, again, of having a very set of elastic technologies that can get any set of glass that you want and you can transact business with. Yeah, that's fine. I think the question that most people are asking is where's the great user experience associated with that, right? And you'll see KPMG is a great example. We acquired a company that just focuses on the social experience that you're having through this. And that's a science, right? And it's not just making pretty web pages like we did back in the dot-com days. The spinning logo, that wasn't, it's not the point. It's around what is the science behind me having a great customer experience which creates brand loyalty on this screen versus this screen versus my TV screen. And how do I make that consistent? I think you're going to see that more and more the science of the customer experience. We talked to John Cleese yesterday after we had our great bit, kind of for the folks out there saw it throwing the water, having a lot of fun. He said, I don't believe how Hollywood's making the big movies and then the kids are watching on this screen. So his whole point was old school like, hey, you have art now in the small screen. Yeah, I think that's the technology, business management angle to this is you've got to be able to shift and make the right decisions. Steve Bates, principal and global director of their technology practice and KPMG. The transformation is happening. Thanks for joining and spending time and sharing some great insights here on theCUBE. Of course, we believe in everything you're saying as well, so great stuff. We'll be right back with our next guest. Kind of winding down day two of three days of coverage. This is theCUBE, we'll be right back after this short break.