ServiceNow CEO Bill McDermott kicked off the company's annual user conference a couple of weeks ago by stating that the vendor will reach $15 billion in revenue in the next five years - triple what it currently brings in annually. And that, according to the former SAP chief, is a conservative estimate.
Over the course of Knowledge 2021 we've certainly seen how customers are expanding their use of the Now platform. Just a few short years ago ServiceNow customers were solely focused on ITSM, whereas now we are hearing workflow stories that range from vaccine management to onboarding new employees.
However, as I highlighted in my recent piece, the route to $15 billion isn't a given. That sort of rapid growth is ambitious. And McDermott is adamant that the company won't be acquiring revenue, focusing instead on organic growth. This will require careful thought and execution on not just the platform's functionality, but how ServiceNow can foster an ecosystem, scale best practice and success across its customer base, as well as build its internal capabilities.
I got the chance to sit down (virtually) with McDermott this week to get a better understanding of how he's thinking about taking the company forward through to 2026. And his confidence in the ambition to grow ServiceNow organically is unfaltering. But the key to this, he said, is maintaining the single architecture of the Now platform that enables customers to scale workflows rapidly, via integration with other systems of record. McDermott said:
Why are we beholden to an organic growth strategy? Because we're growing faster than any other SaaS company in the world at scale. And we're doing that with the best free cash flow margin profile in the business. Therefore you have to say to yourself, why is this working so well?
And I think it's working so well because of the architecture - of one platform and one data model fitting so neatly into IT, employee, customer, and creative workflows. I always say, we're making a market. No one has to lose for us to win.
We are also making all those 20th century systems of record...work better, by taking the workflow across the enterprise. So really organic growth is the path forward. If we [acquire] it's done on a tucking basis, not by buying revenue like other [vendors]. We want a clean, pristine platform for our customers to prosper on.
I see this to be true when talking to ServiceNow customers and it would be foolish for ServiceNow to mess with the ‘clean, pristine' nature of the platform. Customers often cite how the Now platform is being used to accelerate work across its existing systems of records (including SaaS ones), where workflow design using ServiceNow as a platform-of-platforms, means they can more quickly connect the dots across the enterprise.
But whilst the platform is obviously an asset for ServiceNow, that cannot be relied upon. The company also needs to showcase solutions that solve problems for buyers, rather than leaving them to figure it out for themselves. And McDermott has strong ideas on this front too.
Enterprise-wide, vertical solutions
As already outlined, the Now platform is a horizontal play - allowing for automation of old business processes into workflow design across the enterprise. But McDermott stated that the challenge for ServiceNow is not to just make customers realize the breadth of the platform, but also to realize its depth. And key to this is building out industrial/vertical solutions. He said:
So the key to simplification is twofold. Firstly, start with ‘the end' in mind and realize the enterprise nature of the Now platform. And secondly, talk about your specific industry. What are the best practices? How can ServiceNow and ServiceNow partners simplify your roadmap into the future?
That's what we're doing more and more, you're going to see us horizontally perform like an enterprise company. And vertically, put that in an industry context and geographically span the world market - with great partners that are building immense innovation on top of the Now platform with us.
It's true that ServiceNow has had a play in vertical industries for some time, but it feels like this year it is starting to take it seriously. I remember in years gone by that the vertical play was often left for the partner ecosystem to manage, but it seems that now McDermott is wanting to push this agenda internally.
That's not to say it will be doing it completely alone. ServiceNow is thankfully recognizing that it can't master all these verticals without the right knowledge and capability - and the best way to achieve that is through partnership. As it is doing with Siemens and its Operational Technology Management solution. From my understanding, it is these sorts of partnerships that will allow ServiceNow to more quickly scale in specific industries. Picking partners to perfect the solutions with, in collaboration. And then taking them to market for others. McDermott explained:
We'll find a partner that is uniquely advantaged in a particular geography, with a particular know-how in a certain industry - like healthcare, like life sciences, like utilities, like banking, like telco, like manufacturing - and we will pre-build, ready to run business solutions that we know can solve the problems.
Either they are cross platform integration problems where we can use this horizontal platform to do the workflows that have long been left for something like ServiceNow to solve, or we can go in very deep and solve for a certain persona.
And no vertical or industry is off limits. McDermott added:
We will continue to expand in every vertical. We can go deeply into verticals, between two and four a year, depending on how deep the use case is. We're in all of them already, there's not an industry we're not in. But I'm talking about turnkey, out of the box roadmaps. We will be in every industry in the next couple of years at a pretty, pretty deep level.
The new frontier
There are some other elements to the ServiceNow strategy that are worth mentioning, which flesh out McDermott's ambitions for achieving his rapid growth targets. For instance, since he joined the company he's made it a priority to foster the partner ecosystem and encourage the big consultancies/SIs to invest in the Now platform. McDermott provided an update on this and it's clear that this will form a sizable chunk of revenue acquisition going forward. He said:
It's going great. We have seven [partners] now that have committed $1 billion or more in terms of the size of their ServiceNow practice. When I first came in here and I was meeting with them, they were talking about $50 to $100 million. Now there's not a single one of the large ones that doesn't have a billion if not a multi billion business case with ServiceNow.
It's worth highlighting that McDermott is also thinking about how to scale knowledge sharing on customer success both internally at ServiceNow and across the user base. This is something I have highlighted as an imperative, something I'd like to see more of. I want to see ServiceNow showcasing best practices more clearly, outlining for customers precisely how they can achieve effective workflow design. McDermott said:
First and foremost, you've got to listen. You've got to have enormous empathy. These customers are dealing with immense change - $3 trillion has been spent in the last three years on digital transformation and sadly, only one in four projects deliver positive ROI. That's because of the fragmented systems, silos, processes, and teams.
This is an educational process that we must impart in our customer relationships, and that spans from engineering to pre-sales, sales, post-sales, services, and of course the extended ecosystem. Everything has an industry wrapper on it and everything has a persona based wrapper on it. So you're always in a very specific mission critical clear conversation with the customer, which is very, very important.
There is a lot to digest here and there was plenty more to the conversation with McDermott that could have been mentioned. For instance, ServiceNow believes it is in a unique position in the enterprise vendor market to cater to the shift towards ‘direct to consumer', which has been accelerated during the COVID-19 pandemic. This is because workflow design and automation of work between companies, employees and customers is critical in achieving this.
As I've already stated, I want to see more leadership from ServiceNow on showcasing best practice. I want to better understand, for specific industry examples and personas, how to achieve effective workflow design - what's required, the hurdles, and how to get there. You get a better understanding of this by listening to customers talk about their achievements, but at the moment it feels a little too fragmented in terms of knowledge access and needs to be consolidated into something workable for all.
That being said, the customer sessions at Knowledge and the executive strategy from ServiceNow are some of the most coherent and insightful we have seen in recent months. The diginomica team has been impressed by the content coming out of the event. Whilst nothing can be taken for granted and there is plenty of work to do, the key feeling coming from ServiceNow is confidence. For evidence of this, McDermott finished by saying:
We see a clear path to 15 billion+ and I accentuated the ‘plus' when we made the commitment to the capital markets, because we have what the customer needs.
For more diginomica stories from Knowledge 2021 visit our Knowledge 2021 event hub. Knowledge 2021 opened on May 11th and sessions are available to view on-demand until October 2021. This is the event registration link.