A strong start to the new calendar year for ServiceNow as cross-functional strategic thinking and budget planning take a firmer grip on the enterprise.
First up, some stats from the firm’s earnings announcement yesterday:
- A record 41 deals with ACV greater than $1 million closed in Q4.
- 500 customer tally, doing more than $1 billion in total, up 43% year-on-year.
- 50 customers doing more than $5 million per year, more than double year-on-year.
- Biggest customer now tops $20 million.
- Renewal rates north of 97%.
Of note is continued evidence of the firm’s expansion strategy away from its core IT service managmement (ITSM) origins into cross-function client engagements. Eighteen of the top 20 deals in the most recent quarter included at least four products, including the HR Service Delivery, Customer Service Management (CSM), and Security Operations offerings.
ServiceNow CEO John Donahoe sees this as validation of the firm’s push into non-ITSM functional areas of the enterprise, while retaining its long-standing relationship with the core IT team:
In conversations with customers worldwide, I consistently hear how CIOs are being tasked with leading digital transformations across their companies and are looking to deliver great customer and employee experiences in the process…For example, companies are looking to transform the end-to-end employee experience. Employees have come to expect delightful mobile and digital experience at home and are increasingly looking for the same kind of digital experiences at work.
This requires looking at the full end-to-end employee experience as an enterprise-wide initiative, which requires cross-functional collaboration and partnership and integrated digital solutions. Increasingly, we see CIOs partnering with CHROs and other C-suite leaders to deliver this experience. It requires linking together multiple enterprise products and platforms into a seamless experience for their employees. This is what ServiceNow does.
All of this means engaging with enterprise customers across mulitple executive and functional touchpoints:
What is really apparent is as the CIOs are dealing with the need to digitally transform their companies, every CEO said, ‘I want to do a digital transformation’. And they're increasingly looking to the most technically literate person in the C-suite to lead that, which is, in many cases, the CIO.
The CIOs, if I were to summarize what they're saying to me, they're saying, ‘Look, we're embracing cloud. But as I drive this, I need a few trusted partners, a few trusted platforms that I depend upon’. And they're making their choices down at the infrastructure level. They're choosing AWS or Azure, maybe a Google or an IBM.
Then they're looking for a few key strategic software platforms. And increasingly, we are one of those core strategic software platforms…usually, it's initially an ITSM or an existing application. But increasingly, they're looking at cross-functional workflows.
I'll use the example of employee experience being one of them or an onboarding experience. But that's not the only one. They're looking at customer support. They're looking at that as a cross-functional workflow so that they can identify when they have an inbound contact, how they get to the root cause and fix it so that, that contact doesn't happen the next time.
CSM is also seen as a huge growth opportunity, he adds:
Customer service is a huge market. And the reality is our value proposition is really attractive for a portion of the market, not the whole market. And in particular, our value proposition is attractive in situations where you have a lot of high inbound contacts where the customer doesn't want to spend a lot of time on the phone, but rather wants to identify what the root causes are of those inbound contacts, get them fixed, so that next time those contacts don't come in or if the contacts, they can be automated and how the response is. And if they can't be automated, the customer can use self-help.
Let's say for many, many companies in the digital world, the number one root cause of inbound contact is password reset. So, for a company that's got that as an inbound contact and they want to fix their password process, one function can't do that alone. Legal has got to be involved in that. Compliance has to be involved in that. Security, cyber has to be involved in that. Obviously, product teams have to be involved in that. Technology has to be involved in that.
What our platform can uniquely do is take that inbound contact, route the problem to the right area, in the right sequence, in the right way so that all those functions can work effectively together to improve the password reset process so that next time someone has a password reset problem, they can get it addressed in an automated fashion, much like happens in the consumer internet world, right, where you can reset your password, reset in about 20 seconds, wherever you are all over the world. What the customer then gets is a lower number of inbound contacts, more satisfied customers.
What is interesting, according to Donahoe, is that ServiceNow finds itself being pulled into new areas, with customers asking, ‘what’s next?’. With that in mind, he identifies a number of key investment areas for 2018:
One, we're investing heavily in our product and platform.We're investing heavily in deeply embedding machine learning in our platform. I'm delighted that is actually now live in Kingston in CSM and ITSM. [We’re] investing deeply in our platform around mobile end user experience; and [we’re] investing in making sure all of our applications are continuously evolving with new products and features like Cloud Management.
[The] second area of investment is customer success. These large companies need help driving transformation and reengineering, redesigning their processes and they're asking for us to play a more proactive role, partnering with third-party ecosystem providers and so the significant investment in customer success.
[The] third area of investment is talent. We're growing aggressively, adding people all over the world, needing to add new talents, new capabilities, people that have had experienced at the scale we are and at the scale we're going to. We've hired Pat Wadors, our new Chief Talent Officer, who is immediately investing in leadership development, career planning, some of the basic fundamentals of strong talent organization.
And last, but not least, we're also investing in our company brand. Our product brands are very well known with decision makers. Our product brands are very well known in the world of IT. But our company brand - we’re the best kept secret on Silicon Valley or best kept secret across industries, and that's simply because we never really focused on building our company brand. So I brought Alan Marks with me. Alan was the Chief Communications Officer at eBay for the last decade. I'd hired him from Nike. He's joined us and that starts with our core purpose. You'll see us begin to do a little bit of experimentation around elevating our company brand, which, frankly, has as much benefit for recruits and employees as it does external parties, but it will help us raise our visibility at the C-suite a little bit.
As for customers, their own investment plans are changing, for the better in many cases, as the focus shifts to cross-functional planning. Donahoe cites a conversation with the CIO of a global healthcare firm as an exemplar:
She said that she had gotten some incremental budget. She was quite excited. She literally got in an airplane, flew out here to talk with us about employee experience and about how she can put that to work on, again, on workflows that were cross-functional.
I think that's what's beginning to happen is CEOs, CFOs are realizing that to get the real value out of technology, you can't just fund the vertical departments, the vertical silos. You can't just give IT their money, HR their money, marketing their money, that some of the real power and the value of driving a great customer experience, driving a great employee experience and driving great productivity comes from the cross-functional work. I think that's what's beginning to get funded more and more, and I think that's somewhat reflected in our growth.
Donahoe's pitch of cross-functional strategic thinking married to budget planning is an appealing one. Shedding the curse of siloed systems is a long-standing Holy Grail of enterprise IT. If that's finally getting through not only to the C-suite, but also the purse string holders, that's something I'd hope to see a lot more of in 2018.