It has been another strong quarter for ServiceNow, as the workflow cloud vendor announced that its Q4 subscription revenues were up 32% year-on-year to $1.18 billion. CEO Bill McDermott also revealed that the company now has 1,093 customers with more than $1 million in ACV, representing 23% growth year-over-year.
What is particularly interesting for ServiceNow is that many of the top deals signed this year were in areas outside of ITSM, which has historically been its core growth driver. ServiceNow has been pushing a broader ‘enterprise workflow' approach and appears to now be gaining significant traction in areas that relate to employee and customer experience.
This is perhaps unsurprising given the changes that we've seen in the enterprise over the past 12 months, as companies adjust to distributed work and have reconsider how they can use digital tools to engage with customers in the midst of the COVID-19 pandemic.
Commenting on the results, which beat analyst expectations, McDermott said:
Needless to say, we delivered a market leading 2020. We significantly beat expectations across the board bringing great momentum into the New Year. I could not be proud of our team's execution.
We delivered over 30% organic top line growth, 25% operating margins, and $1.4 billion in free cash flow, just an outstanding performance and a testament to our ServiceNow strong culture. Throughout the year, we led with courage and conviction. We took care of our team, our customers and our communities.
And most importantly, we led with ServiceNow's purpose to make the world of work, work better for people. We strive to see the world through our customers' eyes with empathy to address their needs. The workflow revolution is happening and the pandemic is accelerating digital transformation.
McDermott said that 2020 was the first time in history that we have seen digital spending accelerate, despite GDP declining globally. He put this down to businesses realising that they need to change the way that they operate in the wake of the pandemic, with the need to deliver "fierce customer loyalty and deep employee engagement to win". He added:
It's all about people, empathy at mass scale is the business imperative of the 21st century. The secular tailwinds of digital transformation, cloud computing and business model innovations have all intersected at the perfect moment in time, a paradigm here is happening worldwide.
As noted above, ServiceNow delivered 89 deals this quarter with more than $1 million in ACV, which brings its total close to 1,100 customers paying the company over $1 million annually. In addition to this it landed its largest ever deal in Q4, surpassing its previous record in Q3 with the US Department of Veteran Affairs. ServiceNow's overall renewal rate stood at 99%.
McDermott took the opportunity to highlight some customer wins in Q4, which included NHS Scotland, where its platform is being used to help the organisation to roll out the COVID-19 vaccine to 5.5 million citizens. He said that within 12 hours of roll-out, NHS Scotland had booked over 220,000 appointments. We are speaking to NHS Scotland next week about this project, so keep an eye on diginomica for that write up.
In addition to this, ServiceNow signed a multi-year and multi-product deal with AT&T, which is using the Now platform to provide real-time operational visibility into every layer of the company's network fabric, as well enabling better customer experience.
Although not named, a deal was signed with one of the UK's big four banks for ServiceNow's new financial services operations product. McDermott said that the bank has seen a 80% efficiency and improvement of payment processing by integrating the Now platform with its core banking systems and implemented new automated processes in just 60 work-days.
Other companies mentioned that have signed deals with ServiceNow during Q4 include PayPal, Booking.com, BP and Santander UK.
McDermott added that ServiceNow grew its global workforce by 26% in 2020, grew its partner ecosystem and still has its sights on the $10 billion revenue target. And it's clear that McDermott sees much of this growth coming from outside ITSM, which has been its core business for the past decade. He said:
Customer workflows is our next $1 billion-plus market opportunity for ServiceNow, and Q4 showed strong momentum. Customer workflows were included in 11 of our top 20 deals, driving such wins as AT&T. 10 of our customer workflow deals were greater than $1 million. In this pandemic, the employee experience is more important than ever, and our employee workflow is seeing strong demand. In Q4, 11 of our top 20 deals included employee workflows.
Our culture is incredibly strong. Our employee engagement is at historic highs. So too is our employee retention. Our brand is strong. C-suite awareness increased in double-digits. Our innovation pipeline is robust.
We're the only born in the cloud software company to have reached this size without large scale M&A, and we have a clear path to achieve our $10 billion revenue target.