At last week’s ServiceNow Knowledge 2014 Conference, Dave Vellante, host of SiliconANGLE’s theCUBE sat down for an in depth conversation with the CFO for ServiceNow, Mike Scarpelli on the topics of company valuation, global strategy and the upside to the recent stock sector pullback.

“You keep growing like crazy,” Vellante pointed it. “You blew it out last quarter. I think you had $181 million in billings. Your revenues are up by over 60 percent. You’re throwing off cash. You’re hitting all of your metrics.” He continued, “Of course, the stock went down. But you’ve got to really be pleased with the consistent performance, and really predictability it seems, of the company.”

“The one thing I will say about this business model,” Scarpelli began, “is that it is extremely predictable, in terms of forecasting.” He contends this is due almost entirely to their impressively high rate of renewal. “Since I’ve been here we really haven’t lost any major accounts,” he said. “I think our renewal rate has been averaging north of 95 percent.” ServiceNow’s upsell strategy yields about a third of their business each quarter. In fact, CEO of ServiceNow, Frank Slootman, has said on multiple occasions that even if the company failed to sign on any new customers their upsell business to their current installed base of customers would grow the company 25 percent year after year.

Vellante pointed out that ServiceNow did not experience the stock pullback on their own. Along with ServiceNow, companies like Workday, Splunk and Tableau each saw a draw down on their stock values recently. “It’s almost as if you trade as a group even though you are completely different companies with completely different business models,” he offered. “You don’t compete really at all. It’s got to be flattering to be in that group.” Vellante then explained why he views the pullback as being a healthy sign. “How much attention do you even pay to it,” he asked.

Watch the interview in its entirety here:

“You know, unfortunately there is a sort of psychology going on here with some of our employees,” Scarpelli stated. “My comment to them is, ‘The only price that matters is the day you sell’.” He then explains that historically this really is par for the course. “Was I expecting it to happen now,” he pondered. “You know, if I could predict those things I would be in a different line of business.” However, using Salesforce.com as an historical model, he pointed out they experienced four or five 50 percent pullbacks in stock price in their first five years. “This happens. It will happen. I guarantee it will happen again sometime in the future.”

And Tomorrow The World

Also in ServiceNow’s future is continued growth, especially in Asia Pacific. “A large percentage of Global 2000 is in AP,” Vellante noted. “So, you’re out nation building. I wonder if you could talk about that a little bit.”

“From March 31, 2013 until March 31, 2014, we opened up in 10 new countries,” Scarpelli stated. “Most of those were in Asia Pacific. There are still more countries we will be going into in Asia Pacific.” Scarpelli explained the customer acquisition strategy for the company focused more on quality of customer over quantity of customers. “What I mean by quality of customer is one that can grow, over time, to be a very large customer,” he said. In addition to setting their sights on AP, Scarpelli shared how ServiceNow went into Italy last year despite that country’s ailing economy. He explained that Global 2000 customers are not as affected by a specific geography’s economy and so they still spend. “We have a history of showing that if we go into those countries, we will be successful in winning those Global 2000,” he said. However, ServiceNow understands some geographic limitations they have encountered that will slow their ability to have an actual physical presence. “We do not have any sales people in mainland China. We do not have any people in Russia today,” he said.

The conversation naturally turned to a discussion on what the total available market (TAM) that ServiceNow resides in actually looks like. “You and I had talked about it and you said it was north of $8 billion,” Vellante said. “I did my own TAM. Mid-year, I did a blog post and I had it up to $30 billion,” he explained. “You guys are starting to communicate TAM a little bit differently.” Vellante then asked Scarpelli to talk about how ServiceNow looks at TAM and to explain any attempts they made to quantify it.

“There are really four markets we play in that intersect with one another,” Scarpelli began. “The core of our market is the IT Service Management. That’s our beachhead and how we go into accounts.” When ServiceNow first entered that market, Gartner had placed a valuation of $1.4-1.6 billion on it. “What they were missing,” explained Scarpelli, “is that there are many other things in that space of IT Service Management. You have PPM, CMDB, and Asset Management. A lot of these things aren’t in your traditional help desk.” For these reasons, ServiceNow believes the TAM is closer to $4-6 billion with just the IT Service Management.

The Eye Of The Beholder

IT Service Management is, according to Scarpelli, merely a subset of the larger Enterprise Service Management market. “We talked about it at our analyst day,” Scarpelli commented. “We think that is potentially as high as 10x the size of our IT Service Management.” This, he claims, is where Vellante and other analysts have derived TAM of over $40 billion in some instances. While ServiceNow doesn’t plan to make a play for the total market, they see their recent acquisition of Mirror42 as aiding them in a very important market going forward.

“[CEO Frank] Slootman brought up this concept of the whole Business Analytics as well,” Scarpelli stated. “Business Analytics sits at the top of Enterprise Service Relationship Management. That’s a whole market unto itself.” ServiceNow intends to drive their focus within that market solely as it pertains to Enterprise Service Management. This focus has been derived within the company and is not, according to Scarpelli, yet supported by any published reports. “Time is going to tell. It’s similar to when Salesforce went public,” he noted. “No one believed the opportunity in front of it and now look how big that company is.”

With all the talk of existing and potential TAM for Service now, Vellante asked Scarpelli if, in the CFO world, there is any thought put to the ratio between an organization’s TAM and it’s total valuation.

“I, personally, don’t get wrapped up in valuation,” explained Scarpelli. “I can’t control that. I can’t control public company multiples.” He then concluded by saying, “The only thing we have control over is running our own business. And we’re going to stay very focused on running our own business and letting other people take care of the valuation.

All live conference coverage by SiliconANGLE’s theCUBE can be viewed anytime by visiting the SiliconANGLE YouTube channel.

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