COVID means customers need ServiceNow's tech more than ever, says CEO McDermott

Profile picture for user slauchlan By Stuart Lauchlan July 29, 2020
ServiceNow passes the $4 billion annual run rate mark as COVID-19 focuses C-Suite digital intentions.

Image of Bill McDermott ServiceNow CEO

ServiceNow has passed an important milestone as subscription revenues hit a $4 billion annual rate, with COVID-19 focusing C-Suite attention as customers “need us more than ever”. 

Turning in second quarter numbers that comfortably beat Wall Street expectations, CEO Bill McDermott was in typically bullish mood as he declared: 

Our overarching focus is clear - innovating for customers as we scale ServiceNow to $10 billion and beyond…In extraordinary times are born extraordinary opportunities. In this once in a lifetime moment, we are at the top of our game.

Some stats from the quarter: 

  • Total revenue was $1.07 billion, up 30% year-on-year, with a profit of $41 million. 
  • Subscription billings were $1.02 billion, up 25% year-on-year. 
  • Subscription revenue was $1.01 billion, up 30%. 
  • There are now 964 customers with more than $1 million in Annual Contract Value (ACV), up 26% year-on-year.
  • The company closed 40 deals in the quarter with ACV in excess of $1 million.
  • Renewal rate is 97%. 

Multi-product deals continue to grow, with 18 of the top 20 customers using 3 or more offerings.  JP Morgan is a case in point, said McDermott: 

With JPMorgan, we closed our largest IT business management and our largest DevOps deal ever. As they consolidate their ITSM, they are improving their employee experiences, leveraging advanced workflows and Intelligent Automation. [The firm] selected the Now Platform to drive their digital transformation creating great employee experiences and increasing productivity.

Pointing to individual product categories, McDermott called out a number of key wins: 

  • The Commonwealth of Pennsylvania is using ServiceNow to improve efficiency of HR shared services and to increase employee engagement. 
  • Goldman Sachs, a long time ITSM customer, is now using the HR products to provide a more consistent employee experience and to drive cost savings.
  • Zoom is using Customer Service Management (CSM) to to scale its customer service operations, providing critical communication capabilities for its global user base, as well as AIOps capabilities to enable its new hardware as a service business model.
  • Disney is using CSM workflows to support its Disney Plus streaming service subscriber growth. 
  • The US State Department is using the Now Platform to create apps for tracking COVID-19 requirements for countries around the globe to ensure its employees can travel safely.

The pandemic effect

On the subject of COVID-19, worries about the impact of the pandemic on business have not proven true, McDermott said: 

I feel much better than I did three months ago and I didn’t feel bad then. I think people have come to know that the COVID environment is not going away anytime soon and businesses still have to run. Governments still have to serve their citizens, our partners still have to acclimate in this climate and meet the ever-changing and diverse needs of digital transformation for our customers…They're looking for solutions. They need us now more than they ever did before.

COVID is powering some market shifts that play well with ServiceNow, he added: 

This unprecedented environment is breaking physical supply chains. It is exposing the weak links in the old value chains, illuminating how companies struggle cross-functionally to deliver the workflows that create great experiences for customers, employees and partners. The world is experiencing a seismic shift from the obsolete business process evolution to the new workflow revolution. 

McDermott believes the pandemic has focused C-Suite thinking around transformation: 

The CEOs of enterprises around the world are going to be doubling down on their investment in digital transformation. They recognized in a pre-COVID world that you had to transform, but in a post-COVID world, you have to be digital to survive. I mean, just think about it. Your employees have to actually work from anywhere now, if not all the way from home for quite a while.

This plays to ServiceNow’s sweet spot, he argued:

What's interesting is the [role of the] ITSM backbone to really be the thought leader in IT in that strategic authority. it carries over to the employee experience. It carries over to the Customer Service Management side, and also in edge applications. Take a great company like Lowe's. In the heart of COVID, they had to deal with leave requests from their employees. How do I build an application in less than 96 hours and deploy it to 323,000 people? Well, you do it on a low-code platform like the Now Platform and you get it out there.

The firm recently launched its Safe Workplace apps to encourage organizations to get employees back into offices:

ServiceNow is on the front line of getting companies re-opened. We are helping employees get back to the workplace safely. In May, we launched our Safe Workplace application suite and dashboard….More than 550 organizations worldwide have downloaded our safe workplace suite, companies such as Uber, Coca-Cola European Partners and Bank United are using the apps and dashboard to return to the workplace safely.

My take

People have adjusted.The shock of March has now become a norm, and business is going on.

A strong quarter and a confident start to the second half of the year from McDermott and team.