Another strong quarter for ServiceNow with 28 new customer deals worth more than $1 million bringing the total to 575 customers on annual contracts of more than $1 million.
For the second quarter, ServiceNow turned in a net loss of $52.7 million, down slightly year-on-year, on $631.1 million in revenue, up more than 41%. Subscription revenues grew 45% year-on-year.
It’s to the customer stories that CEO John Donahoe points:
We doubled the number of customers doing more than $5 million with us to 58. And our largest customer is now doing more than $25 million, leveraging our IT and HR Service Delivery products to drive digital transformation, and enable great employee experiences.
We are driving customer success to be a natural extension of our sales motion, and are committed to not only landing new customers, but also expanding existing relationships in a healthy and sustainable manner. For example, our customer success approach enables United Airlines to better serve their customers. Our leader for United has orchestrated various initiative teams and resources in their digital transformation journey, resulting in a more focused strategy to drive business outcomes.
Digital transformation is an agenda item that comes up in every meeting that Donahoe has with C-suite execs:
It's now in a multi-hundred customer meetings how consistently that's coming up. And because every industry and every company is being disrupted by software, every company is embracing digital technology. And it's now become a C-suite CEO issue. And the effect that's having on us is, it's pulling up the awareness of ServiceNow's platform in the enterprise. [For] IOs, I think, increasingly the question is not, ‘do you use ServiceNow?’ to ‘why are you not using ServiceNow?’ and ‘how broadly can you use ServiceNow to help drive your digital transformation?’.
The ITOM (IT Operations Management) product set continues to set the pace, he adds, with those offerings featuring in 17 of the top 20 deals signed in the second quarter. He cites a couple of examples:
A large US government agency has evolved with us over the past four years to become one of our biggest customers today. They're using our IT products to standardize their services and to map and better manage their software technology across multiple systems. And we're working closely with them to develop a longer-term digital transformation strategy, and deepen our partnership to enable their success.
Then there’s an unnamed financial organization which has recently appointed a new CIO with grand plans:
He wants to run IT as a business. And because he's in financial services, he's got a lot of regulatory and compliance requirements along the way. So, as he shaped his strategy, ServiceNow was one of the core pillars of that strategy in a very strategic way. He's using our ITOM products to replace a number of legacy tools, and replacing them with the modern ServiceNow platform to drive huge efficiencies, and to give him better data.
So they had significant disaster recovery and business continuity challenges, and those had regulatory implications. He's now using ServiceNow to spring automation and integration of these other core systems that allows him to both streamline his work flows [and] to drive the automation, which drives better productivity, but also gives him the data and monitoring and tracking so that he can be compliant and confident of his compliance.
The ‘run IT as a business’ meme is one that’s also being heard a lot, says Donahoe:
[If] I've heard one CIO say, ‘I want to run IT like a business’, I've heard a hundred say it. And our ITOM suite helps them run it as a business. And so, that combines with digital transformation, where if they're running IT as a business, then they need to be focusing on how they drive cross-functional enablement. I think, the visibility of our ITOM capabilities is just getting higher.
Steady as she goes. It’s another impressive quarter and the direction of travel is consistently upwards. What is reassuring is that Donahoe and his management team are taking a pragmatic and realistic approach to growth - “building out functions thoughtfully” as the CEO puts it.
This is still a relatively nascent market. CFO Michael Scarpelli argues:
We only have about 4,500 enterprise customers. There's over 22,000 potential customers in the world. And every one of those will need an ITSM product. In many of our Global 2000 customers in large enterprises, we've only cracked into a country or a division. There's still a huge opportunity for ITSM within those customers.